Barrett Business Services(US:BBSI)2026-02-25 23:02Financial Data and Key Metrics Changes - For the full year 2025, gross billings increased by 8.6% to $9 billion, compared to $8.3 billion in the prior year, while diluted earnings per share rose by 5% to $2.08 from $1.98 [15] - In Q4 2025, gross billings increased by 6.4% to $2.4 billion, compared to $2.25 billion in Q4 2024, and diluted earnings per share increased by 2% to $0.64 from $0.60 [15][16] - Average billing per worksite employee (WSE) per day increased by 1.5% in the quarter, driven by sustained wage growth [16] Business Line Data and Key Metrics Changes - The staffing business declined by 13% year-over-year in Q4 and 11% for the full year, reflecting client reluctance to place staffing orders amid macroeconomic uncertainty [8] - PEO gross billings increased by 6.6% in Q4 to $2.38 billion, while staffing revenues declined to $18 million [15][16] - PEO worksite employees grew by 5.1% in Q4, driven by record WSEs added from new clients, despite client workforce reductions [16] Market Data and Key Metrics Changes - Southern and Northern California both grew by 5%, while the Mountain and East Coast regions grew by 10%. The Pacific Northwest declined by 4%, and asset-light markets grew by 95% [16] - Client net hiring has been below historical norms throughout 2025, with reductions across all geographies and nearly all industries, particularly in California and construction [7][16] Company Strategy and Development Direction - The company is focusing on expanding its asset-light model and has successfully converted two emerging markets to traditional branches [4] - Continued investment in technology and product development, including enhancements to the myBBSI platform and new IT products, is a key part of the strategy [10][12] - The company aims to maintain controllable growth despite macroeconomic headwinds, with expectations for gross billings to increase between 3% and 5% in 2026 [23][24] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about future growth despite macroeconomic uncertainties, with a focus on client needs and retention [3][14] - The company anticipates that negative hiring trends will continue into 2026, but expects improvements as the year progresses [27] - Wage growth is expected to moderate, with clients facing challenges in finding skilled labor [29][30] Other Important Information - The company repurchased $17 million of shares in Q4 2025, with a total of $42 million repurchased throughout the year [23] - The company paid $8.2 million in dividends for the year, returning a total of $50 million to shareholders [23] - The balance sheet remains strong with $157 million of unrestricted cash and investments and no debt [20] Q&A Session Summary Question: What are you hearing from your clients in terms of being able to improve growth throughout 2026? - Management anticipates that negative hiring trends will continue into 2026, with a potential for improvement later in the year [26][27] Question: What are you hearing from clients regarding the ability to pay higher wages in 2026? - Wage growth is real and has moderated, with clients still facing challenges in finding skilled labor [29][30] Question: Is there any improvement in sight for 2026 on the payroll tax side? - Payroll tax rates are expected to see a modest increase, but mechanisms are in place to manage these costs [33] Question: Are you expecting margins to improve as the year progresses relative to the workers' compensation pricing environment? - Management is cautiously optimistic about margin improvements, particularly in California, where rates are expected to increase [34][35] Question: How does the new client pipeline of qualified leads look currently? - The pipeline remains strong, with good volume and consistency in client acquisition [43] Question: Is the hiring trend improving this year, and is it broad-based? - The deterioration in hiring trends has been broad across industries, with construction remaining particularly weak [45]