Financial Data and Key Metrics Changes - Gross billings increased by 7% year-over-year to $1.9 billion in Q1 2024, consistent with expectations [11] - PEO gross billings also rose by 7% to $1.89 billion, while staffing revenues declined by 12% to $20 million [11] - Net loss for Q1 was $0.1 million or $0.02 per diluted share, compared to net income of $0.8 million or $0.12 per diluted share in the prior year [15] Business Line Data and Key Metrics Changes - The staffing business experienced a decline of 12% compared to the prior year quarter, which was within expected ranges [7] - PEO worksite employees grew by 3.1% year-over-year, attributed to strong controllable growth from new clients and modest hiring within existing clients [11][12] - Average billing per worksite employee increased by 3.5% in the quarter [12] Market Data and Key Metrics Changes - Client hiring showed moderate positive trends across all regions except the Northwest, which was impacted by declines in the construction sector [12] - The East Coast saw a 17% growth in PEO gross billings, while the Pacific Northwest declined by 6% [12] Company Strategy and Development Direction - The company is focused on expanding its asset-light model and has added 15 new Market Development Managers [7] - A strategic multi-year partnership with Kaiser Permanente was announced, expected to enhance product offerings and drive growth [9] - The company aims to continue its controllable growth strategy by adding and retaining clients, with expectations for gross billings to increase between 6% and 8% for the year [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic outlook, anticipating greater growth in billings for 2024 compared to 2023 [37] - The company noted that payroll tax rates have increased, which will impact margins but is expected to stabilize over the year [46] - Overall, the company remains confident in its growth trajectory and product offerings, particularly with the upcoming launch of the Kaiser partnership [9][17] Other Important Information - The company repurchased $7 million of shares in Q1 at an average price of $120 per share, with $52 million remaining under the repurchase program [16] - A four-for-one stock split was announced, pending shareholder approval, aimed at increasing liquidity and trading efficiency [16] Q&A Session Summary Question: Insights on gross billings growth and hiring expectations - Management indicated that modest growth in client hiring is expected, particularly in the construction sector, which could benefit billings growth [18][19] Question: Clarification on health care plan client numbers - The increase in clients on the health care plan was attributed to the timing of reporting, with a focus on February and March data [21] Question: Expectations for the Kaiser partnership - Initial expectations for the Kaiser program were tempered, with ongoing marketing and sales efforts underway [23] Question: Enrollment process for health insurance - The majority of health insurance enrollments will occur on January 1, with July 1 being the second largest effective date [29] Question: Details on the asset-light model and branch development - Two markets are transitioning to traditional branches, specifically in Dallas and Chicago, with ongoing investments in local HR professionals [31] Question: Earnings cadence and seasonal trends - The company expects Q3 to be the peak season for operations, with Q2 and Q4 showing similar patterns [33]

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 March 31, 2024 ☐ 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 BARRETT BUSINESS SERVICES, INC. (Exact name of registrant as specified in its charter) Maryland 52-0812977 (State or other jurisdiction of ...

EXHIBIT 99.1 BBSI Reports Strong First Quarter 2024 Financial Results - Revenues of $265.8 Million with Gross Billings up 7% - VANCOUVER, Washington, May 1, 2024 – Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the first quarter ended March 31, 2024. First Quarter 2024 Financial Summary vs. Year-Ago Quarter • Revenues up 4% to $265.8 million. • Gross billings up 7% to $1.91 billion. • Average works ...

Financial Data and Key Metrics Changes - Gross billings increased by 4% to $7.7 billion in 2023 compared to $7.4 billion in the prior year, while diluted earnings per share rose by 13% to $7.39 from $6.54 [13][14] - In Q4 2023, gross billings increased by 5% to $2.05 billion compared to $1.95 billion in Q4 2022, and diluted earnings per share increased by 32% to $2.16 from $1.64 [14] Business Line Data and Key Metrics Changes - PEO gross billings increased by 6% in Q4 to $2 billion, while staffing revenues were $22 million, reflecting a 22% decline year-over-year [14][15] - PEO worksite employees grew by 2% in Q4, driven by strong growth from net new PEO clients, despite slower hiring within existing clients [14][15] Market Data and Key Metrics Changes - The East Coast PEO gross billings grew by 16%, Mountain States by 10%, Southern California by 6%, Pacific Northwest by 3%, while Northern California remained flat [15] - The staffing business experienced a 22% decline year-over-year, attributed to macroeconomic factors and a shift in strategy [9][15] Company Strategy and Development Direction - The company is focusing on expanding its asset-light model and entering new markets, with plans to establish physical locations in three markets in 2024 [10][45] - Continued investment in technology and product offerings, including enhancements to myBBSI and the introduction of new health insurance products, is expected to drive growth [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2024, expecting gross billings to increase between 6% and 8% and average worksite employees to rise by 4% to 5% [20] - The company anticipates a return to positive net client hiring in 2024, with signs of improvement in residential construction spending [20][21] Other Important Information - The company achieved a Net Promoter Score of 64, indicating strong client satisfaction and willingness to recommend BBSI [7] - The company repurchased $5 million of shares in Q4 2023, with a total of over $34 million repurchased throughout the year [19] Q&A Session Summary Question: Can you discuss the underwriting risk on healthcare? - Management clarified that they do not take on underwriting risk for healthcare, opting for a fixed fee model to ensure consistent cash flow and earnings [24] Question: How has the renewal season gone and what is the pricing environment? - Management reported a 94% renewal rate and noted that while medical costs are rising, they have been able to offer competitive pricing due to being a new entrant in the market [32][33] Question: What is the outlook for workers' compensation adjustments? - Management indicated that favorable adjustments for prior year liabilities are expected to continue, with 2023 being the largest in history [38] Question: How has the view of the economy changed? - Management noted improvements in client hiring and stability in the workforce, particularly in the construction sector, leading to optimism for 2024 [40] Question: What are the plans for physical locations? - Management confirmed plans to open three physical locations in 2024, with ongoing recruitment to support these expansions [45]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 Commission File Number 0-21886 BARRETT BUSINESS SERVICES, INC. (Exact name of registrant as specified in its charter) Maryland 52-0812977 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 8100 NE Parkway Drive, Suite 200 Vancouver, Washington 98662 (Ad ...

EXHIBIT 99.1 BBSI Reports Strong Fourth Quarter and Full Year 2023 Financial Results - Q4 2023 Net Income of $14.6 Million, or $2.16 per Diluted Share - - Full Year 2023 Net Income of $50.6 Million, or $7.39 per Diluted Share - VANCOUVER, Washington, February 28, 2024 – Barrett Business Services, Inc. ("BBSI" or the "Company") (NASDAQ: BBSI), a leading provider of business management solutions, reported financial results for the fourth quarter and full year ended December 31, 2023. Fourth Quarter 2023 Finan ...

Barrett Business Services, Inc. (NASDAQ:BBSI) Q3 2023 Results Conference Call November 1, 2023 5:00 PM ET Company Participants Gary Kramer - President and CEO Anthony Harris - CFO Conference Call Participants Jeff Martin - ROTH Capital Partners Chris Moore - CJS Securities Vincent Colicchio - Barrington Research Marc Redick - Sidoti & Company Operator Good afternoon, everyone, and thank you for participating in today's conference call to discuss BBSI's Financial Results for the Third Quarter Ended September ...

Part I - Financial Information [Item 1. Unaudited Interim Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) Unaudited Q3 2023 financials report $690.0 million in assets, flat revenue, $18.2 million net income, and improved operating cash flow [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached $690.0 million as of September 30, 2023, with stable liabilities and equity growing to $180.4 million Condensed Consolidated Balance Sheet Summary (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $41,579 | $91,423 | | Trade accounts receivable, net | $205,217 | $163,838 | | Total current assets | $427,461 | $454,362 | | Total assets | $690,008 | $686,938 | | **Liabilities & Equity** | | | | Total current liabilities | $341,109 | $334,731 | | Total liabilities | $509,562 | $509,096 | | Total stockholders' equity | $180,446 | $177,842 | | Total liabilities and stockholders' equity | $690,008 | $686,938 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 revenues were flat at $273.3 million due to PEO growth offsetting staffing decline, with net income rising to $18.2 million Q3 2023 vs Q3 2022 Statement of Operations (in thousands, except per share amounts) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | PEO Services Revenue | $251,423 | $244,567 | | Staffing Services Revenue | $21,905 | $29,255 | | **Total Revenues** | **$273,328** | **$273,822** | | Gross Margin | $68,329 | $66,901 | | Income from Operations | $22,302 | $22,346 | | **Net Income** | **$18,219** | **$17,438** | | Diluted EPS | $2.68 | $2.45 | Nine Months Ended Sep 30, 2023 vs 2022 Statement of Operations (in thousands, except per share amounts) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | PEO Services Revenue | $727,986 | $694,174 | | Staffing Services Revenue | $64,639 | $88,202 | | **Total Revenues** | **$792,625** | **$782,376** | | Gross Margin | $176,919 | $174,139 | | Income from Operations | $42,452 | $44,116 | | **Net Income** | **$36,054** | **$35,740** | | Diluted EPS | $5.24 | $4.91 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity grew to $180.4 million, primarily from $36.1 million net income, offset by $29.1 million in repurchases and $6.1 million in dividends - Key activities impacting **stockholders' equity** during the first nine months of **2023** included: - **Net income** of **$36.1 million**[28](index=28&type=chunk) - Company **repurchases** of **common stock** totaling **$29.1 million** (sum of **$7,582k**, **$9,500k**, **$10,280k** from retained earnings and related capital adjustments)[28](index=28&type=chunk) - **Cash dividends paid** of **$6.1 million** (sum of **$2,067k**, **$2,013k**, **$2,025k**)[28](index=28&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations improved to $10.0 million, while investing used $17.5 million and financing used $37.4 million, resulting in a $44.9 million cash decrease Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $9,999 | $(3,059) | | Net cash (used in) provided by investing activities | $(17,547) | $42,472 | | Net cash used in financing activities | $(37,394) | $(50,024) | | **Net decrease in cash, cash equivalents and restricted cash** | **$(44,942)** | **$(10,611)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, a $302.8 million investment portfolio, $177.8 million workers' compensation liabilities, an IRS audit, and a joint-employer class-action lawsuit - The company's **investment portfolio**, measured at fair value, totaled **$302.8 million** as of September 30, **2023**[59](index=59&type=chunk)[63](index=63&type=chunk) - The majority of these investments are classified as **Level 2** in the fair value hierarchy, consisting primarily of corporate bonds, U.S. treasuries, and mortgage-backed securities[59](index=59&type=chunk)[63](index=63&type=chunk) - The company has significantly reduced its **retained risk** for **workers' compensation claims** through **loss portfolio transfer agreements** and new insurance arrangements[70](index=70&type=chunk)[71](index=71&type=chunk) - For claims incurred from July **1**, **2021**, onward under its **primary insured program**, **third-party insurers** have assumed all risk of loss[70](index=70&type=chunk)[71](index=71&type=chunk) - The **IRS** is examining **federal tax returns** for **2017**-**2021** and intends to disallow certain **wage-based tax credits**, which could result in an estimated **$7.4 million** in **additional taxes** and **$1.7 million** in **penalties** for **2017**-**2020**[79](index=79&type=chunk) - The company disagrees with the determination and has not recorded a reserve[79](index=79&type=chunk) - The company is a defendant in a **wage and hour class-action lawsuit** where a key issue is whether BBSI was a **joint-employer**[80](index=80&type=chunk)[82](index=82&type=chunk) - The company intends to vigorously defend the claim, but the potential range of loss is currently inestimable[80](index=80&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights a strategic shift to higher-margin PEO services, maintaining gross margin despite flat revenue, with solid liquidity supporting repurchases and dividends [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q3 2023 revenues were flat at $273.3 million due to PEO growth offsetting staffing decline, with gross margin increasing to 25.0% and net income rising to $18.2 million Key Performance Metrics | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Gross Billings (in thousands) | $1,963,462 | $1,908,818 | 2.9% | | Average WSEs | 127,232 | 125,813 | 1.1% | - The increase in **PEO services revenue** was driven by growth in WSEs from new clients and higher average billing per WSE[99](index=99&type=chunk) - The decrease in **staffing revenue** was due to lower demand and tight labor market conditions[99](index=99&type=chunk) - **Payroll taxes and benefits expense** increased as a percentage of revenue, primarily due to **$3.4 million** in costs related to **new employee benefit offerings** for PEO clients that began in **2023**[99](index=99&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Total cash decreased by $44.9 million to $62.4 million, primarily due to $29.1 million in repurchases and $6.1 million in dividends, despite $10.0 million in operating cash flow - **Net cash from operations** for the first nine months of **2023** was **$10.0 million**, compared to a use of **$3.1 million** in the same period of **2022**[105](index=105&type=chunk) - **Net cash used in financing activities** was **$37.4 million**, primarily consisting of **$29.1 million** for **common stock repurchases** and **$6.1 million** for **dividend payments**[105](index=105&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk primarily involves interest rate changes impacting the investment portfolio; a 50 basis point rate increase would decrease fair value by $5.2 million - A **50 basis point** increase in **market interest rates** would have a **$5.2 million** downward effect on the fair value of the Company's **investment portfolio**[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective as of September 30, 2023, with no material changes to internal controls - The Company's **CEO and CFO** concluded that the **disclosure controls and procedures** were effective as of September **30**, **2023**[110](index=110&type=chunk) - No changes in **internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company's **internal control**[111](index=111&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings primarily involve a wage and hour class action lawsuit concerning the company's joint-employer status - The company is involved in a significant **wage and hour class action lawsuit** where the key issue is its status as a **joint-employer**[80](index=80&type=chunk)[82](index=82&type=chunk)[114](index=114&type=chunk) - The company is defending the claim, but the potential loss is not currently estimable[80](index=80&type=chunk)[82](index=82&type=chunk)[114](index=114&type=chunk) [Item 1A. Risk Factors](index=28&type=page&id=Item%201A.%20Risk%20Factors) Key risks include potential determination as a non-legal employer in co-employment, and new risks from healthcare reforms and data privacy regulations like HIPAA - A significant risk is the potential determination that BBSI is not the "**administrative employer**," which could make clients jointly liable for employment taxes and discourage them from using BBSI's services[116](index=116&type=chunk) - The introduction of **employee health benefits** in **2023** exposes the company to new risks related to **healthcare reform** (e.g., the Affordable Care Act) and compliance with **data privacy laws** like **HIPAA** for handling **protected health information** (PHI)[117](index=117&type=chunk)[118](index=118&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2023, the company repurchased 115,400 shares; a new $75.0 million stock repurchase program was authorized, with $64.1 million remaining Stock Repurchases for Q3 2023 | Month | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July | - | - | | August | 48,500 | $95.66 | | September | 66,900 | $93.83 | | **Total** | **115,400** | **N/A** | - On July **31**, **2023**, the **Board of Directors** authorized a new **stock repurchase program** for up to **$75.0 million** of **common stock** over a two-year period[121](index=121&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) Exhibits include required CEO and CFO certifications and Inline XBRL data files - The filing includes required **CEO and CFO certifications** pursuant to Rule **13a-14(a)** and Section **1350**, along with **Inline XBRL data files**[123](index=123&type=chunk)

Barrett Business Services, Inc. (NASDAQ:BBSI) Q2 2023 Earnings Conference Call August 2, 2023 5:00 PM ET Company Participants Gary Kramer - President and CEO Anthony Harris - CFO Conference Call Participants Chris Moore - CJS Jeff Martin - ROTH MKM Vincent Colicchio - Barrington Research Operator Good afternoon, everyone, and thank you for participating in today's conference call to discuss BBSI's Financial Results for the Second Quarter Ended June 30, 2023. Joining us today are BBSI's President and CEO, Mr ...

[PART I – FINANCIAL INFORMATION (Unaudited)](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information%20(Unaudited)) This section presents BBSI's unaudited interim condensed consolidated financial statements and notes for the periods ended June 30, 2023 [Item 1. Unaudited Interim Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) This section presents BBSI's unaudited interim condensed consolidated financial statements and notes for periods ending June 30, 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show a slight decrease in total assets and liabilities from December 31, 2022, to June 30, 2023, with stable stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Total assets | $671,904 | $686,938 | | Total liabilities | $493,935 | $509,096 | | Total stockholders' equity | $177,969 | $177,842 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues slightly increased for Q2 and six months ended June 30, 2023, driven by PEO services, while staffing declined, leading to a minor net income decrease Condensed Consolidated Statements of Operations (in thousands) **Three Months Ended June 30:** | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :-------- | :-------- | :--------- | :--------- | | Total revenues | $264,630 | $262,179 | $2,451 | 0.9% | | PEO services revenue | $244,256 | $232,174 | $12,082 | 5.2% | | Staffing services revenue | $20,374 | $30,005 | $(9,631) | -32.1% | | Gross margin | $67,046 | $66,885 | $161 | 0.2% | | Net income | $17,016 | $18,014 | $(998) | -5.5% | | Basic EPS | $2.52 | $2.52 | $0.00 | 0.0% | | Diluted EPS | $2.47 | $2.48 | $(0.01) | -0.4% | **Six Months Ended June 30:** | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :-------- | :-------- | :--------- | :--------- | | Total revenues | $519,297 | $508,554 | $10,743 | 2.1% | | PEO services revenue | $476,563 | $449,607 | $26,956 | 6.0% | | Staffing services revenue | $42,734 | $58,947 | $(16,213) | -27.5% | | Gross margin | $108,590 | $107,238 | $1,352 | 1.3% | | Net income | $17,835 | $18,302 | $(467) | -2.6% | | Basic EPS | $2.62 | $2.51 | $0.11 | 4.4% | | Diluted EPS | $2.57 | $2.48 | $0.09 | 3.6% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income for the three and six months ended June 30, 2023, significantly improved compared to the prior year, primarily due to a reduction in unrealized losses on investments Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) **Three Months Ended June 30:** | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :-------- | :-------- | | Net income | $17,016 | $18,014 | | Unrealized losses on investments, net of tax | $(2,028) | $(8,624) | | Comprehensive income | $14,988 | $9,390 | **Six Months Ended June 30:** | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :-------- | :-------- | | Net income | $17,835 | $18,302 | | Unrealized gains (losses) on investments, net of tax | $1,624 | $(22,982) | | Comprehensive income (loss) | $19,459 | $(4,680) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity at June 30, 2023, increased slightly from December 31, 2022, influenced by net income and share-based compensation, offset by repurchases and dividends Changes in Stockholders' Equity (Six Months Ended June 30, 2023, in thousands) | Item | Impact on Equity (in thousands) | | :---------------------------------------- | :--------------- | | Balance, December 31, 2022 | $177,842 | | Common stock issued | $2 | | Common stock repurchased | $(10,145) | | Share-based compensation expense | $1,963 | | Cash dividends on common stock | $(2,013) | | Unrealized loss on investments, net of tax | $(2,028) | | Net income | $17,016 | | Balance, June 30, 2023 | $177,969 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, the company experienced a net decrease in cash, cash equivalents, and restricted cash, primarily due to operating and financing activities Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2023 (in thousands) | 2022 (in thousands) | | :------------------------ | :---------- | :---------- | | Net cash used in operating activities | $(23,197) | $(37,416) | | Net cash (used in) provided by investing activities | $(6,363) | $39,383 | | Net cash used in financing activities | $(23,223) | $(36,458) | | Net decrease in cash, cash equivalents and restricted cash | $(52,783) | $(34,491) | | Cash, cash equivalents and restricted cash, end of period | $54,595 | $44,138 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, financial instrument valuations, workers' compensation liabilities, debt, income tax, and legal matters, providing crucial context [Note 1 - Basis of Presentation of Interim Period Statements](index=9&type=section&id=Note%201%20-%20Basis%20of%20Presentation%20of%20Interim%20Period%20Statements) This note outlines the basis for preparing interim financial statements, detailing key accounting policies for revenue, costs, cash, investments, workers' compensation, and EPS - PEO revenues are reported net of direct payroll costs, as the Company is not the primary obligor for wage payments to client employees. Staffing revenues are recognized as services are rendered[34](index=34&type=chunk) - Workers' compensation claims liabilities are management's best estimate, utilizing actuarial expertise and projection techniques, and are reviewed at least quarterly[42](index=42&type=chunk) Cash, Cash Equivalents and Restricted Cash (in thousands) | Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------- | :------------ | :---------------- | | Cash and cash equivalents | $48,347 | $91,423 | | Restricted cash | $6,248 | $15,955 | | Total | $54,595 | $107,378 | Weighted Average Common Shares Outstanding (in thousands) | Period | Basic (2023, in thousands) | Basic (2022, in thousands) | Diluted (2023, in thousands) | Diluted (2022, in thousands) | | :----- | :----------- | :----------- | :------------- | :------------- | | Three Months Ended June 30 | 6,751 | 7,162 | 6,875 | 7,257 | | Six Months Ended June 30 | 6,809 | 7,284 | 6,931 | 7,365 | [Note 2 - Fair Value Measurement](index=13&type=section&id=Note%202%20-%20Fair%20Value%20Measurement) The company's available-for-sale investments are measured at fair value, with unrealized gains/losses in OCI, primarily consisting of corporate bonds, U.S. treasuries, and mortgage-backed securities Total Investments at Fair Value (in thousands) | Category | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------- | :------------ | :---------------- | | Current Investments | $84,658 | $68,325 | | Restricted Cash and Investments | $185,966 | $199,326 | | Total Investments | $282,288 | $307,947 | Contractual Maturities of Available-for-Sale Securities (June 30, 2023, in thousands) | Maturity Period | Corporate Bonds (in thousands) | U.S. Treasuries (in thousands) | U.S. Gov. Agency Securities (in thousands) | Asset Backed Securities (in thousands) | Money Market Funds (in thousands) | Emerging Markets (in thousands) | Total (in thousands) | | :-------------- | :-------------- | :-------------- | :-------------------------- | :---------------------- | :----------------- | :--------------- | :---- | | Less than 1 Year | $3,049 | $3,775 | $1,539 | - | $11,692 | $1,981 | $22,036 | | Between 1 to 5 Years | $63,667 | $27,007 | $24,269 | $792 | - | - | $115,735 | | Between 5 to 10 Years | $38,847 | $29,665 | $3,535 | $11,921 | - | - | $83,968 | | After 10 Years | $175 | - | - | $1,269 | - | - | $1,444 | | Total | $105,738 | $60,447 | $29,343 | $13,982 | $11,692 | $1,981 | $223,183 | [Note 3 – Workers' Compensation Claims](index=15&type=section&id=Note%203%20%E2%80%93%20Workers'%20Compensation%20Claims) Workers' compensation claims liabilities decreased, with most exposure covered by an insured program, and the company retaining risk for claims incurred prior to July 1, 2021, and for self-insured programs Workers' Compensation Claims Liabilities (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :------------ | :---------------- | | Ending balance | $191,822 | $216,000 | | IBNR | $90,053 | $124,320 | | Ratio of IBNR to liabilities | 47% | 51% | - Approximately **84%** of the Company's workers' compensation exposure is covered through an insured program, with third-party insurers assuming all risk for claims incurred from July 1, 2021, onwards[64](index=64&type=chunk) - The Company retains risk for claims incurred under the insured program prior to July 1, 2021, up to **$3.0 million** or **$5.0 million** per occurrence, and for all claims under its self-insured programs up to **$1.0 million** to **$3.0 million** per occurrence depending on the state[64](index=64&type=chunk)[68](index=68&type=chunk) - The trust account balance for collateral under the insured program was **$163.4 million** at June 30, 2023, down from **$188.2 million** at December 31, 2022[66](index=66&type=chunk) [Note 4 - Revolving Credit Facility and Long-Term Debt](index=18&type=section&id=Note%204%20-%20Revolving%20Credit%20Facility%20and%20Long-Term%20Debt) The company's $50.0 million revolving credit facility was amended on July 31, 2023, extending its term to July 1, 2026, and modifying sublimits and covenants - Revolving credit line of **$50.0 million**, extended to July 1, 2026, with a sublimit for standby letters of credit increased from **$8.0 million** to **$25.0 million**[71](index=71&type=chunk) - Financial covenants were modified, including a decrease in the minimum tangible net worth requirement from **$100 million** to **$50 million**[71](index=71&type=chunk) - The Company had no outstanding borrowings on its revolving credit line at June 30, 2023, and was in compliance with all covenants[71](index=71&type=chunk) [Note 5 – Income Taxes](index=19&type=section&id=Note%205%20%E2%80%93%20Income%20Taxes) The company evaluates deferred tax assets quarterly and was in a cumulative income position; the IRS is examining federal tax returns for 2017-2021, proposing disallowance of certain wage-based tax credits - The Company was in a cumulative income position for the 12 quarters ended June 30, 2023, supporting the realizability of deferred tax assets[74](index=74&type=chunk) - IRS examination for 2017-2021 proposes disallowing wage-based tax credits, potentially resulting in **$7.4 million** in additional taxes and **$1.7 million** in penalties for 2017-2020, plus **$0.6 million** for 2021. The Company disputes this[74](index=74&type=chunk) - Total gross unrecognized tax benefits of **$0.6 million** (excluding interest and penalties) as of June 30, 2023, are not expected to materially change in the next 12 months[74](index=74&type=chunk) [Note 6 – Litigation](index=19&type=section&id=Note%206%20%E2%80%93%20Litigation) The company faces ongoing class action wage and hour lawsuits in California, with one case settled and another reversed on appeal regarding joint-employer status, which BBSI will defend - The 'Kaanaana v. Barrett Business Services, Inc.' class action lawsuit regarding prevailing wage and meal break violations has been settled and is final[75](index=75&type=chunk)[77](index=77&type=chunk) - In the 'Merry Maids franchisee' class action, the Ninth Circuit Court of Appeals reversed summary judgment for BBSI, finding a triable issue of fact on joint-employer status. BBSI intends to vigorously defend this claim[77](index=77&type=chunk) - Management has recorded estimated liabilities totaling **$2.0 million** in other accrued liabilities for ongoing legal proceedings and claims[77](index=77&type=chunk) [Note 7 – Subsequent Events](index=20&type=section&id=Note%207%20%E2%80%93%20Subsequent%20Events) The only significant subsequent event is the July 31, 2023, amendment of the revolving credit facility with Wells Fargo Bank, N.A., extending its term and modifying covenants - On July 31, 2023, the Company amended its credit agreement with Wells Fargo Bank, N.A., extending the revolving credit line to July 1, 2026, and increasing the sublimit for standby letters of credit to **$25.0 million**[78](index=78&type=chunk)[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, business model, and operational results for the periods ended June 30, 2023 and 2022 [General](index=21&type=section&id=General) BBSI provides business management solutions for small and mid-sized companies, integrating management consulting with human resource outsourcing, including workers' compensation and employee benefits - BBSI provides business management solutions for small and mid-sized companies, leveraging a management platform that integrates management consulting and human resource outsourcing[81](index=81&type=chunk) - The company operates a decentralized delivery model with local business teams in **68 markets**, offering strategic leadership and expert consultation[81](index=81&type=chunk) - BBSI offers workers' compensation coverage and began offering employee benefits (medical, dental, vision, etc.) to PEO clients in 2023[85](index=85&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) For Q2 and the first six months of 2023, net income slightly decreased despite modest revenue growth from PEO services, offsetting a significant decline in staffing services Revenue Mix and Growth **Three Months Ended June 30:** | Metric | 2023 (%) | 2022 (%) | Change (2023 vs 2022) | | :----- | :------- | :------- | :-------------------- | | PEO services revenue | 92.3% | 88.6% | +5.2% | | Staffing services revenue | 7.7% | 11.4% | -32.1% | | Total revenues | 100.0% | 100.0% | +0.9% | **Six Months Ended June 30:** | Metric | 2023 (%) | 2022 (%) | Change (2023 vs 2022) | | :----- | :------- | :------- | :-------------------- | | PEO services revenue | 91.8% | 88.4% | +6.0% | | Staffing services revenue | 8.2% | 11.6% | -27.5% | | Total revenues | 100.0% | 100.0% | +2.1% | Key Financial Ratios as Percentage of Gross Billings **Three Months Ended June 30:** | Metric | 2023 | 2022 | | :----- | :---- | :---- | | PEO and staffing wages | 86.9% | 86.9% | | Payroll taxes and benefits | 7.0% | 6.9% | | Workers' compensation | 2.6% | 2.5% | | Gross margin | 3.5% | 3.7% | **Six Months Ended June 30:** | Metric | 2023 | 2022 | | :----- | :---- | :---- | | PEO and staffing wages | 86.9% | 86.9% | | Payroll taxes and benefits | 7.5% | 7.4% | | Workers' compensation | 2.7% | 2.7% | | Gross margin | 2.9% | 3.0% | Worksite Employees (WSEs) Growth **Three Months Ended June 30:** | Metric | 2023 | % Change | 2022 | % Change | | :----- | :-------- | :------- | :-------- | :------- | | Average WSEs | 124,186 | 1.6% | 122,234 | 8.8% | | Ending WSEs | 127,336 | 2.8% | 123,853 | 8.4% | **Six Months Ended June 30:** | Metric | 2023 | % Change | 2022 | % Change | | :----- | :-------- | :------- | :-------- | :------- | | Average WSEs | 121,749 | 2.1% | 119,216 | 9.1% | | Ending WSEs | 127,336 | 2.8% | 123,853 | 8.4% | [Fluctuations in Quarterly Operating Results](index=25&type=section&id=Fluctuations%20in%20Quarterly%20Operating%20Results) The company anticipates significant quarterly fluctuations in operating results due to seasonality, payroll tax wage limits, workers' compensation claims, service demand, and competition - Quarterly operating results are expected to fluctuate due to seasonality, wage limits on statutory payroll taxes, workers' compensation claims experience, demand for services, and competition[98](index=98&type=chunk) - Payroll taxes generally decline throughout the calendar year as statutory wage bases are exceeded. Revenue may be higher in Q3 due to agriculture, food processing, and forest products industries, and lower in Q4 due to holiday schedules[98](index=98&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash balance decreased by **$52.8 million** for the six months ended June 30, 2023, primarily due to increased receivables, decreased workers' compensation liabilities, and stock repurchases Cash Balance and Changes (in thousands) | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :------------ | :---------------- | | Cash, cash equivalents, and restricted cash | $54,595 | $107,378 | | Net decrease (six months) | $(52,783) | $(34,491) | - Net cash used in operating activities was **$23.2 million** for the six months ended June 30, 2023, primarily due to increased trade accounts receivable (**$34.2 million**) and decreased workers' compensation claims liabilities (**$24.9 million**)[100](index=100&type=chunk) - Net cash used in financing activities was **$23.2 million**, mainly from **$18.2 million** in common stock repurchases and **$4.1 million** in dividend payments[100](index=100&type=chunk) [Forward-Looking Information](index=27&type=section&id=Forward-Looking%20Information) This section highlights forward-looking statements covering economic conditions, service competitiveness, client retention, gross margin, labor market, workers' compensation reserves, tax assets, and litigation - Forward-looking statements include discussions on economic conditions, competitiveness, client retention, revenue growth, gross margin, labor market, workers' compensation reserves, deferred tax assets, insurance subsidiaries, and litigation costs[102](index=102&type=chunk) - Key risk factors include the ability to retain and attract clients, effects of governmental orders, integration difficulties, economic trends, workers' compensation claims experience, regulatory changes, security breaches, collectability of receivables, tax rate changes, inflation, healthcare reforms, capital market conditions, and availability of financing[102](index=102&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is to interest rate changes, affecting its investment portfolio, with a hypothetical 50 basis point increase resulting in a **$5.5 million** downward effect on fair value - The Company's market risk primarily relates to interest rate changes affecting its investment portfolio[104](index=104&type=chunk) - A **50 basis point** increase in market interest rates would result in a **$5.5 million** downward effect on the fair value of the investment portfolio at June 30, 2023[104](index=104&type=chunk) - The investment portfolio at June 30, 2023, included **$105.7 million** in corporate bonds, **$60.4 million** in U.S. treasuries, and **$51.1 million** in mortgage-backed securities[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[105](index=105&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[106](index=106&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance due to inherent limitations like resource constraints, human error, collusion, or management override[107](index=107&type=chunk) [PART II – OTHER INFORMATION](index=29&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) This section provides additional information including legal proceedings, updated risk factors, details on equity security sales and use of proceeds, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 6 of the condensed consolidated financial statements for detailed information on the company's legal proceedings - Information regarding legal proceedings is detailed in Note 6 to the condensed consolidated financial statements[109](index=109&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, highlighting new risks related to the company's 'employer' status, healthcare reform compliance, and data security regulations from offering health benefits - New risk factors include potential liabilities if the company is determined not to be an 'employer' under certain laws, which could deter clients and affect its ability to offer health benefits[111](index=111&type=chunk) - Risks associated with healthcare reforms, specifically the Patient Protection and Affordable Care Act, include potential penalties for non-compliance with employer mandates and increased costs or limitations on offering health benefits[112](index=112&type=chunk) - Failure to comply with data security regulations (e.g., HIPAA, HITECH Act) related to protected health information (PHI) from offering health benefits could adversely affect the business and reputation[113](index=113&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **123,361** shares of common stock during Q2 2023, and a new **$75.0 million** stock repurchase program was authorized on July 31, 2023, replacing the previous program Stock Repurchases (Quarter Ended June 30, 2023) | Month | Total Shares Repurchased | Average Price Paid Per Share | | :---- | :----------------------- | :--------------------------- | | April | 5,000 | $82.77 | | May | 90,461 | $81.41 | | June | 27,900 | $84.80 | | Total | 123,361 | | - As of June 30, 2023, the company had repurchased **819,851 shares** for **$65.3 million** under the February 2022 program[116](index=116&type=chunk) - On July 31, 2023, a new **$75.0 million** stock repurchase program was authorized for a two-year period, replacing the prior program[116](index=116&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) This item reiterates the amendment to the revolving credit agreement with Wells Fargo Bank, N.A., on July 31, 2023, which extended the credit line and modified certain terms and covenants - The revolving credit agreement with Wells Fargo Bank, N.A., was amended on July 31, 2023, extending the **$50.0 million** credit line to July 1, 2026, and increasing the standby letter of credit sublimit to **$25.0 million**[117](index=117&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, the first amendment to the credit agreement, and XBRL-related documents - Exhibits include CEO and CFO certifications (31.1, 31.2), certification pursuant to 18 U.S.C. Section 1350 (32*), and the First Amendment to the Third Amended and Restated Credit Agreement (4.1)[119](index=119&type=chunk) [Signatures](index=31&type=section&id=Signatures) The report is duly signed on behalf of Barrett Business Services, Inc. by Anthony J. Harris, Executive Vice President and Chief Financial Officer, and Treasurer, on August 2, 2023 - The report was signed by Anthony J. Harris, Executive Vice President and Chief Financial Officer, and Treasurer, on August 2, 2023[121](index=121&type=chunk)