UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File Number 0-21886 Maryland 52-0812977 (IRS Employer Identification No.) 8100 NE Parkway Drive, Suite 200 Vancouver, Washington 98662 (Address of principal ex ...

Part I [Executive Summary](index=1&type=section&id=Executive%20Summary) [Q2 2025 Performance Highlights](index=1&type=section&id=Q2%202025%20Performance%20Highlights) BBSI reported strong Q2 2025 financial results, with 10% increases in revenues and gross billings, alongside healthy net income and EPS growth Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------- | :---------- | :---------- | :--------- | | Revenues | $307.7 million | $279.7 million | +10% | | Gross Billings | $2.23 billion | $2.03 billion | +10% | | Net Income | $18.5 million | $16.7 million | +10.8% | | Diluted EPS | $0.70 | $0.62 | +12.9% | | Average WSEs Growth | 8% | 3.7% | +4.3 pp | - BBSI sustained positive momentum with strong net new client growth and continued client retention, demonstrating the strength of its business model and value proposition[2](index=2&type=chunk) [Strategic Initiatives & Outlook](index=1&type=section&id=Strategic%20Initiatives%20%26%20Outlook) BBSI authorized a new $100 million stock repurchase program, continued dividends, and raised 2025 guidance for key growth metrics - A new **$100 million** stock repurchase program was authorized over a two-year period, replacing the program approved in July 2023[9](index=9&type=chunk) - The Company paid **$2.0 million** of dividends in the quarter and confirmed its next regular quarterly cash dividend at **$0.08 per share**[10](index=10&type=chunk) Updated 2025 Outlook | Metric | New Guidance | Previous Guidance | | :------------------------------------ | :---------------- | :---------------- | | Gross billings growth | 9% to 10% | 7% to 9% | | Average WSEs growth | 6% to 8% | 4% to 6% | | Gross margin as a percent of gross billings | 2.9% to 3.05% | 2.85% to 3.10% | | Effective annual tax rate | 26% to 27% | 26% to 27% | Detailed Financial Results [Revenues and Gross Billings](index=1&type=section&id=Revenues%20and%20Gross%20Billings) Total revenues and gross billings for Q2 2025 both increased by **10%**, driven primarily by growth in PEO services and increased WSEs Q2 2025 Revenues and Gross Billings | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------- | :---------- | :---------- | :--------- | | Revenues | $307.7 million | $279.7 million | +10% | | Gross Billings | $2.23 billion | $2.03 billion | +10% | - The increase in gross billings was driven by growth in professional employer organization (PEO) services, primarily from increased worksite employees (WSEs) from net new clients, modest client hiring, and higher average billings per WSE per day[4](index=4&type=chunk) [Profitability and Expenses](index=1&type=section&id=Profitability%20and%20Expenses) Q2 2025 net income increased to **$18.5 million** with diluted EPS of **$0.70**, while workers' compensation expense improved to **2.1%** of gross billings Q2 2025 Net Income and EPS | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------- | :---------- | :---------- | :--------- | | Net Income | $18.5 million | $16.7 million | +10.8% | | Diluted EPS | $0.70 | $0.62 | +12.9% | Workers' Compensation Expense | Metric | Q2 2025 | Q2 2024 | | :------------------------------------ | :-------- | :-------- | | Workers' compensation expense as % of gross billings | 2.1% | 2.5% | | Favorable prior year liability and premium adjustments | $8.8 million | $8.9 million | [Liquidity and Capital Allocation](index=2&type=section&id=Liquidity%20and%20Capital%20Allocation) BBSI maintained a debt-free position with **$90.4 million** in cash, returning capital to shareholders, and authorizing a new **$100 million** repurchase program Liquidity Snapshot | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------- | :-------------- | :--------------- | | Unrestricted cash and investments | $90.4 million | $99.1 million | - BBSI remained debt-free at quarter end[8](index=8&type=chunk) - Repurchased **$8.0 million** of stock (197,200 shares at an average price of **$40.80**) in the second quarter[9](index=9&type=chunk) - Year-to-date capital returned to shareholders through stock repurchases and dividends totaled more than **$21 million**[10](index=10&type=chunk) Key Performance Indicators (KPIs) [Gross Billings and Wages Analysis](index=3&type=section&id=Gross%20Billings%20and%20Wages%20Analysis) Gross billings for Q2 2025 reached **$2.23 billion** and **$4.32 billion** for the six months, demonstrating consistent growth in business activity Gross Billings and PEO/Staffing Wages (Unaudited, in billions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross billings | $2.23 billion | $2.03 billion | $4.32 billion | $3.94 billion | | PEO and staffing wages | $1.94 billion | $1.76 billion | $3.75 billion | $3.42 billion | - Management considers gross billings and wages useful for understanding the volume of business activity and as important performance metrics for operations and executive compensation[15](index=15&type=chunk) [Operational Efficiency Ratios](index=3&type=section&id=Operational%20Efficiency%20Ratios) Operational efficiency ratios remained stable or improved, with workers' compensation decreasing to **2.1%** and gross margin consistent at **3.3%** for Q2 2025 Percentage of Gross Billings (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | PEO and staffing wages | 86.8% | 86.9% | 86.7% | 86.9% | | Payroll taxes and benefits | 7.8% | 7.3% | 8.3% | 7.9% | | Workers' compensation | 2.1% | 2.5% | 2.3% | 2.5% | | Gross margin | 3.3% | 3.3% | 2.7% | 2.7% | [Worksite Employee (WSE) Growth](index=3&type=section&id=Worksite%20Employee%20(WSE)%20Growth) BBSI reported robust WSE growth, with average WSEs increasing by **8.0%** to **138,969** and ending WSEs growing by **8.2%** for Q2 2025 Worksite Employee (WSE) Growth (Unaudited) | Metric | Three Months Ended June 30, 2025 | % Growth YoY | Three Months Ended June 30, 2024 | % Growth YoY | | :---------- | :------------------------------- | :------------- | :------------------------------- | :------------- | | Average WSEs | 138,969 | 8.0% | 128,734 | 3.7% | | Ending WSEs | 140,671 | 8.2% | 130,046 | 2.1% | Worksite Employee (WSE) Growth (Unaudited) | Metric | Six Months Ended June 30, 2025 | % Growth YoY | Six Months Ended June 30, 2024 | % Growth YoY | | :---------- | :------------------------------- | :------------- | :------------------------------- | :------------- | | Average WSEs | 135,714 | 7.8% | 125,892 | 3.4% | | Ending WSEs | 140,671 | 8.2% | 130,046 | 2.1% | Financial Statements [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$713.6 million** as of June 30, 2025, primarily due to lower cash and investments, while stockholders' equity slightly increased Condensed Consolidated Balance Sheet Highlights (Unaudited, in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Total assets | $713.6 million | $745.5 million | | Cash and cash equivalents | $26.3 million | $55.4 million | | Investments | $64.1 million | $66.5 million | | Trade accounts receivable, net | $264.2 million | $234.5 million | | Total current assets | $471.4 million | $475.4 million | | Total liabilities | $487.8 million | $523.3 million | | Stockholders' equity | $225.8 million | $221.4 million | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenues for Q2 2025 increased to **$307.7 million**, driven by PEO services, with net income of **$18.5 million** and diluted EPS of **$0.70** Consolidated Statements of Operations Highlights (Unaudited, in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $307.7 million | $279.7 million | $600.2 million | $545.4 million | | Professional employer services revenue | $290.2 million | $259.9 million | $565.1 million | $506.1 million | | Staffing services revenue | $17.5 million | $19.8 million | $35.1 million | $39.4 million | | Gross margin | $73.3 million | $67.9 million | $115.9 million | $107.5 million | | Income from operations | $23.0 million | $20.4 million | $18.9 million | $15.7 million | | Net income | $18.5 million | $16.7 million | $17.4 million | $16.6 million | | Diluted income per common share | $0.70 | $0.62 | $0.66 | $0.62 | Company Overview & Forward-Looking Information [About BBSI](index=4&type=section&id=About%20BBSI) BBSI provides comprehensive business management solutions, including HR outsourcing and consulting, serving over **8,100 PEO clients** nationwide - BBSI provides business management solutions, combining human resource outsourcing and professional management consulting[20](index=20&type=chunk) - The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management, and human resource administration[20](index=20&type=chunk) - BBSI works with more than **8,100 PEO clients** in all 50 states[20](index=20&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from projections - Statements about future events and financial outlook are forward-looking and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[21](index=21&type=chunk) - Factors that could affect future results include economic conditions, governmental policies, inflation, workers' compensation claims experience, PEO client benefits costs, litigation, security breaches, and tax rates[21](index=21&type=chunk) - The Company undertakes no obligation to update or revise forward-looking statements to reflect events or changes in circumstances that occur after the date of the release[21](index=21&type=chunk) Investor Information [Conference Call Details](index=2&type=section&id=Conference%20Call%20Details) BBSI will host a conference call on August 6, 2025, to discuss Q2 2025 financial results, with webcast and replay information available - A conference call to discuss Q2 2025 financial results will be held on Wednesday, August 6, 2025, at **5:00 p.m. Eastern time**[11](index=11&type=chunk)[12](index=12&type=chunk) - The conference call will be broadcast live and available for replay via the Investors section of the BBSI website at ir.bbsi.com[13](index=13&type=chunk) - A replay of the conference call will be available until **September 6, 2025**[15](index=15&type=chunk) [Investor Relations Contact](index=6&type=section&id=Investor%20Relations%20Contact) For investor relations inquiries, please contact Cody Slach at Gateway Group, Inc - Investor Relations contact: Cody Slach, Gateway Group, Inc., Tel **1-949-574-3860**, BBSI@gateway-grp.com[27](index=27&type=chunk)

Core Insights - Barrett Business Services, Inc. (BBSI) reported a 10% increase in revenues to $307.7 million and gross billings to $2.23 billion for the second quarter of 2025 compared to the same quarter in 2024 [3][4][10] - The company announced a new $100 million stock repurchase program, replacing the previous program established in July 2023 [8] Financial Performance - Revenues increased by 10% from $279.7 million in Q2 2024 to $307.7 million in Q2 2025 [3][10] - Gross billings rose by 10% from $2.03 billion in Q2 2024 to $2.23 billion in Q2 2025, driven by growth in professional employer services and increased worksite employees (WSEs) [4][10] - Net income for Q2 2025 was $18.5 million, or $0.70 per diluted share, compared to $16.7 million, or $0.62 per diluted share, in Q2 2024 [6][10] Operational Metrics - Average WSEs increased by 8% year-over-year, from 128,734 in Q2 2024 to 138,969 in Q2 2025 [18] - Workers' compensation expense as a percentage of gross billings decreased to 2.1% in Q2 2025 from 2.5% in Q2 2024, benefiting from lower costs [5][17] Capital Allocation - The company repurchased $8.0 million of stock in Q2 2025, comprising 197,200 shares at an average price of $40.80 [8] - BBSI paid $2.0 million in dividends during the quarter, with a confirmed quarterly cash dividend of $0.08 per share to be paid on September 5, 2025 [9] Liquidity Position - As of June 30, 2025, BBSI had unrestricted cash and investments totaling $90.4 million, down from $99.1 million as of March 31, 2025 [7]

Core Insights - Barrett Business Services, Inc. (BBSI) has opened a new physical branch in Chicago, transitioning to a full-service model in the area [1][2] - The Chicago branch aims to enhance BBSI's support for local businesses, particularly small and mid-sized enterprises, by providing a range of services including payroll, HR, and risk management [2][3] - The branch will be led by Dave Wills, who has extensive experience in Human Capital Management, indicating a strong leadership presence for the new location [4] Company Overview - BBSI is a leading provider of business management solutions, specializing in human resource outsourcing and professional management consulting [5] - The company serves over 8,100 PEO clients across all 50 states, highlighting its extensive reach and operational capabilities [5] - BBSI's integrated platform focuses on payroll processing, employee benefits, workers' compensation, risk management, and workplace safety programs [5]

Core Viewpoint - Barrett Business Services, Inc. (BBSI) will hold a conference call on August 6, 2025, to discuss its financial results for Q2 2025, which ended on June 30, 2025 [1][2]. Group 1 - The conference call will be hosted by CEO Gary Kramer and CFO Anthony Harris, followed by a Q&A session [2]. - The call is scheduled for 5:00 p.m. Eastern time (2:00 p.m. Pacific time) [2]. - Participants can join the call using a toll-free number or an international dial-in number, with a conference ID provided for access [2]. Group 2 - The conference call will be broadcast live and available for replay on the BBSI website, with a replay accessible until September 6, 2025 [3]. - BBSI is recognized as a leading provider of business management solutions, specializing in human resource outsourcing and professional management consulting [3]. - The company serves over 8,100 PEO clients across all 50 states, focusing on improving operational efficiency through its integrated platform [3].

Chase Mortenson, a Dallas native and graduate of Oklahoma State University, will lead the Dallas branch. With a background in finance and marketing, his passion for supporting entrepreneurs and driving meaningful results is at the heart of BBSI's expansion into North Texas. The BBSI Dallas branch is located at 8580 Belleview Drive, Suite 200, Plano, TX 75024, (214) 682-6390, http://www.bbsi.com/locations/dallas. About BBSI VANCOUVER, Wash., July 23, 2025 (GLOBE NEWSWIRE) -- Barrett Business Services, Inc. ( ...

Industry Overview - The Zacks Outsourcing industry is facing challenges such as data privacy regulations, communication barriers, geopolitical risks, quality control issues, and loss of control [1] - Despite these headwinds, the industry is driven by the need to cut costs, the rise of remote work, increased focus on cybersecurity, and trends in AI and ML [1] Future Trends - Business process outsourcing (BPO) services are experiencing consistent growth due to flexibility, lower costs, and improved service quality [4] - The IT outsourcing market is robust, with companies increasingly outsourcing entire IT departments to reduce costs and focus on core operations, driven by a shortage of in-house engineering talent [4] Cybersecurity Demand - There is a rising demand for data encryption and cybersecurity measures due to increased public awareness and evolving cyber threats [5] - Companies are focusing on employee security training and breach detection systems, with many turning to outsourced cybersecurity services to mitigate risks [5] Technological Innovations - Trends such as IoT, cloud computing, AI, and ML are transforming the outsourcing sector, enhancing efficiency and competitiveness [6] - Innovations allow for real-time decision-making and predictive maintenance, while AI and ML integration in customer support optimizes operational costs [6] Industry Performance - The Zacks Outsourcing industry currently holds a Zacks Industry Rank of 196, placing it in the bottom 20% of 246 Zacks industries, indicating underperformance [7][8] - Over the past year, the industry has declined by 6.9%, underperforming the broader Zacks Business Services sector and the S&P 500, which grew by 16.6% and 13.8% respectively [9][10] Current Valuation - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 15.96X, compared to the S&P 500's 22.75X and the sector's 22.38X [12] Investment Opportunities - **Barrett Business Services, Inc. (BBSI)**: Focuses on payroll administration and staffing, with growth driven by new client sales and technology investments [15][16] - **The Brink's Company, Inc. (BCO)**: A global provider of cash management services, experiencing growth across segments, particularly in digital retail solutions [18][19] - **Capgemini SE (CGEMY)**: An IT services and consulting company benefiting from strong growth in financial services and public sector, with a focus on AI [20][21]

Core Points - Barrett Business Services, Inc. (BBSI) has appointed Joseph S. Clabby as the new Chairman of the Board of Directors, succeeding Tony Meeker, who will remain on the board [2][3] - Clabby has been with BBSI since September 2022 and was previously Vice Chairman of the Board, bringing over two decades of experience from ACE Limited and Chubb [3] - The Vice Chairman position will remain unfilled for the time being [4] Company Overview - BBSI is a leading provider of business management solutions, specializing in human resource outsourcing and professional management consulting [5] - The company serves over 8,100 PEO clients across all 50 states, focusing on payroll processing, employee benefits, workers' compensation, risk management, and workplace safety programs [5]

Core Insights - Barrett Business Services (BBSI) reported revenue of $2.09 billion for the quarter ended March 2025, reflecting a year-over-year increase of 9.5% [1] - The earnings per share (EPS) for the same period was -$0.04, compared to -$0.01 a year ago, indicating a decline [1] - The reported revenue exceeded the Zacks Consensus Estimate of $2.06 billion, resulting in a surprise of +1.31% [1] - The company delivered an EPS surprise of +69.23%, with the consensus EPS estimate being -$0.13 [1] Financial Performance Metrics - Gross billings were reported at $2.09 billion, surpassing the two-analyst average estimate of $2.06 billion [4] - Revenues from professional employer services amounted to $274.93 million, exceeding the average estimate of $264.74 million by two analysts, representing an increase of +11.7% year-over-year [4] - Revenues from staffing services were reported at $17.64 million, which fell short of the two-analyst average estimate of $19.94 million, reflecting a year-over-year decline of -10% [4] Stock Performance - Shares of Barrett have returned +8.8% over the past month, compared to the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance against the broader market in the near term [3]

Financial Data and Key Metrics Changes - Gross billings increased by 9.5% year-over-year to $2.09 billion in Q1 2025 compared to $1.91 billion in Q1 2024 [17] - PEO gross billings rose by 10% to $2.07 billion, while staffing revenues declined by 10% to $18 million [17] - Average billing per worksite employee (WSE) increased by 2.6% in the quarter [18] - The net loss per diluted share was $0.04 compared to a net loss of $0.01 per diluted share in the same quarter last year [23] Business Line Data and Key Metrics Changes - Worksite employees grew by 7.6% in the quarter, driven by a record number of new client additions [18] - Staffing operations experienced a decline of 10% year-over-year, attributed to macroeconomic headwinds [6][17] - The company added approximately 7,900 worksite employees year-over-year from net new clients [5] Market Data and Key Metrics Changes - The East Coast region saw a growth of 14%, Southern California grew by 11%, Mountain region by 9%, Northern California by 6%, while the Pacific Northwest declined by 1% [19] - Southern California represents the largest region for the company, achieving double-digit growth due to consistent client additions and hiring [19] Company Strategy and Development Direction - The company is focusing on geographic expansion with plans to open new physical locations in Chicago, Dallas, and Nashville by early Q3 [8][31] - Investments in new markets and product offerings, including a new health insurance product, are expected to drive future growth [9][10] - The company aims to enhance the employee life cycle experience through technology investments and product launches throughout the year [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic environment, noting potential impacts on client hiring and investment [14][15] - Despite a strong start to the year, the company is maintaining its outlook for billings growth and worksite employee growth due to economic uncertainties [24] - The company believes that small businesses benefit from PEO relationships during challenging times, positioning itself for sustainable growth [15] Other Important Information - The company repurchased $9 million of shares in Q1 under its $75 million repurchase program [24] - The company paid $2.1 million in dividends during the quarter and reaffirmed its dividend for the following quarter [24] Q&A Session Summary Question: What percentage of clients have direct tariff exposure? - Management indicated that most clients are in service industries with minimal direct exposure, primarily facing indirect impacts from increased material costs [28] Question: Is there an annual goal for new physical offices? - Management stated that the number of new physical locations depends on market development rather than a fixed annual target [30] Question: How much growth could come from geographic expansion over the next five years? - Management views geographic expansion as a long-term investment, expecting profitability to materialize in year three and beyond [34] Question: Are existing clients or new clients driving growth in benefits? - The company has seen a shift towards a more balanced contribution from both existing and new clients in the benefits segment [42] Question: Is the company displacing more legacy PEOs than before? - Management noted that while many new clients are first-time PEO users, there is an increase in PEO takeaways in certain markets [46] Question: How is pricing trending in the current economic backdrop? - Management reported that workers' compensation pricing has moderated, with minimal fluctuations expected [54]