Barrett Business Services (BBSI) investor relations material

Executive summary

• Q3 revenue rose 4.7% to $334.1M and gross billings increased 3.2% to $2.40B; net income fell to $16.8M from $20.6M and diluted EPS to $0.69 from $0.79.

• Average WSEs increased 0.6% to 142,319; new-client additions and retention partly offset workforce reductions among existing clients and soft staffing demand.

• 9M revenue rose 4.5% to $960.3M; GAAP net income was $14.8M, including an $11.6M after-tax tax-credit charge.

Financial highlights

• Q3 operating income was $21.2M versus $24.8M; gross margin was $72.7M versus $76.8M.

• Q3 PEO gross billings rose 3.3% to $2.38B; SG&A decreased ~2% YoY, primarily due to lower employee-related expenses.

• Investment income fell ~$0.7M YoY to $1.2M, primarily due to lower average investment balances.

• 9M operating income was $30.2M versus $43.6M; adjusted net income was $26.4M and diluted EPS $1.06, versus GAAP net income of $14.8M and EPS of $0.60.

Outlook and guidance

• FY2026 gross billings growth guidance remained 3%-4%; average WSE growth outlook was reduced to 1%-2% from 2%-3% amid soft client hiring.

• FY2026 gross margin guidance remained 2.7%-2.75% of gross billings, expected toward the low end due to slower favorable workers’ compensation adjustments.

• Normalized effective annual tax rate, excluding the one-time Q1 charge, was expected at 26%-27%; full-year SG&A growth was expected below gross billings growth and prior-year SG&A growth.

• Workers’ compensation margin was expected in line with prior years for 2026; 2027 results depend partly on pricing and the July 2027 insurance renewal.