Barrett Business Services(BBSI) - 2025 Q2 - Quarterly Results

Part I Executive Summary Q2 2025 Performance Highlights 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] Strategic Initiatives & Outlook 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] - 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] 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 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] Profitability and Expenses 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 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] - Repurchased $8.0 million of stock (197,200 shares at an average price of $40.80) in the second quarter[9] - Year-to-date capital returned to shareholders through stock repurchases and dividends totaled more than $21 million[10] Key Performance Indicators (KPIs) Gross Billings and Wages Analysis 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] Operational Efficiency Ratios 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 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 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 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 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] - The Company's integrated platform is built upon expertise in payroll processing, employee benefits, workers' compensation coverage, risk management, and human resource administration[20] - BBSI works with more than 8,100 PEO clients in all 50 states[20] Forward-Looking Statements 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] - 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] - 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] Investor Information Conference Call Details 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][12] - The conference call will be broadcast live and available for replay via the Investors section of the BBSI website at ir.bbsi.com[13] - A replay of the conference call will be available until September 6, 2025[15] Investor Relations Contact 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]