Earnings Call Insights: Barrett Business Services, Inc. (BBSI) Q3 2025
Management View
During the earnings call, CEO Gary Kramer highlighted the company’s continued momentum in the third quarter of 2025. He noted that the company delivered a record number of worksite employees and attributed solid revenue growth to new client sales, expanded adoption of new products, and strong client retention. Kramer emphasized an 8.6% increase in gross billings compared to the prior year’s quarter, along with record net new client worksite employees and a Net Promoter Score that remained in the high 60s for the third consecutive year.
Kramer mentioned that the company added a record 10,400 worksite employees year-over-year from net new clients. However, he also acknowledged that client hiring was lower than anticipated. A slowdown in California across most industries was observed, influenced by macroeconomic uncertainties such as tariff policies and interest rates.
The staffing business experienced a 10.3% decline, while efforts to recruit for PEO clients resulted in 116 placements, which is 11 more than the previous year.
Kramer expressed satisfaction with the company’s expansion into new markets using its asset-light model. He mentioned the addition of 22 new market development managers and recent grand openings in Chicago and Dallas. Plans for a Nashville branch were also announced for January.
Product expansion continued, with Kramer stating that approximately 1,300 participants were added to various benefits products in Q3. By October, the company had approximately 750 clients on these plans, with over 20,000 total participants.
CFO Anthony Harris reported that gross billings increased by 8.6% to $2.32 billion in Q3 2025, compared to $2.14 billion in Q3 2024. PEO gross billings rose 8.8% to $2.3 billion, while staffing revenues declined by 10% to $19 million.
Harris added that the balance sheet remains strong, with $110 million in unrestricted cash and investments at September 30, and no debt. He confirmed $8 million in share repurchases and $2.1 million in dividends paid during Q3.
Outlook
Harris updated the guidance, stating that the company now expects gross billings growth between 8.5% and 9.5% for the year after adjusting for slower client hiring in the quarter. The company anticipates strong year-end controllable growth and an increase in worksite employees between 6% and 8% for the year.
Harris noted that the company is tightening its range for gross margin as a percent of gross billings, expecting it to be between 2.9% and 3.0%. The effective annual tax rate is expected to be between 26% and 27%.
Financial Results
Gross billings for Q3 reached $2.32 billion, with PEO gross billings at $2.3 billion, staffing revenues at $19 million, and net income per diluted share for the quarter at $0.79, compared to $0.74 per diluted share in the year-ago quarter.
SG&A expenses increased by approximately 2%, primarily due to employee-related costs. Investment income totaled $1.9 million in the third quarter, down by about $300,000 from the prior year due to lower average interest rates.
The company repurchased $8 million of shares at an average price of $47 per share and returned $10 million to shareholders in Q3.
Workers’ compensation pricing trends were discussed, with Harris noting that the California Insurance Commissioner recently approved an average 8.7% increase in workers’ compensation premium rates, with several carriers filing for similar increases.
Q&A
Jeff Martin of ROTH Capital Partners asked about BBSI Benefits performance amid rising claims costs. Kramer stated that the company does not take on the risk for health insurance and has derisked on workers’ compensation. He noted that rates are increasing for all carriers and that the volume of 1/1 business through October was about 60% higher than the previous year.
Martin questioned the drivers behind record WSE adds, to which Kramer responded that it is due to multiple factors, including technology, product offerings, people, and sales efforts.
Martin also inquired about workers’ comp rate increases and 2026 WSE growth. Kramer indicated that carrier filings are increasing by 8% to 10% and that the company will not shy away from asking for more rate if warranted.
Christopher Moore of CJS Securities asked about variables for 2026 gross billings. Kramer stated that there is no change in the formula, emphasizing controllable growth and wage inflation as key factors.
Moore questioned the potential for asset-light market growth. Kramer said that the company will add over 2,000 WSEs from the asset-light model.
Vincent Colicchio of Barrington Research asked about the new client pipeline. Kramer noted that there is more business in the funnel now than last year, especially in the benefit side.
Colicchio inquired about existing client growth and economic outlook. Kramer discussed weakness in California, labeling construction pullback as likely transitory, while transportation/logistics and retail may not rebound soon.
Marc Riddick of Sidoti asked about Chicago and Dallas openings, IT product focus, and client mix. Kramer described successful branch openings, upcoming tech launches, and consistent client profiles for new business.
William Dezellem of Tieton Capital asked about WSE trends and health quote pipeline. Harris noted a slight decrease in average hours worked; Kramer indicated that average client size has increased slightly but emphasized that growth is driven by the velocity of new client adds.
Sentiment Analysis
Analysts expressed curiosity about the sustainability of growth, drivers behind record WSE adds, and market challenges, with a tone of cautious optimism but probing for details on potential risks and growth levers.
Management maintained an optimistic and confident tone in prepared remarks, shifting to a more nuanced and explanatory approach during Q&A, particularly when discussing market uncertainties and regional slowdowns. Kramer demonstrated transparency, while Harris provided detailed operational and financial explanations.
Compared to the previous quarter, analysts’ questions focused more on the sustainability of growth and possible macro headwinds, while management maintained a similar level of confidence but acknowledged more near-term challenges in client hiring and certain regional economies.
Quarter-over-Quarter Comparison
Gross billings growth guidance for the full year was adjusted to 8.5%-9.5% from the previous quarter’s 9%-10%, reflecting slower client hiring.
PEO worksite employee growth slowed to 6.1% in Q3 from 8% in Q2, with record net new client adds offset by client workforce reductions, particularly in California.
Staffing business decline moderated slightly from -11.5% in Q2 to -10.3% in Q3.
Asset-light market expansion accelerated, with 22 development managers active in Q3 vs. 21 in Q2, and the model expected to contribute over 2,000 WSEs for the year.
Management reiterated focus on controllable growth and product expansion, especially BBSI Benefits, and maintained a strong capital return approach with ongoing buybacks and dividends.
Analyst questions in both quarters centered around growth drivers, insurance pricing, product expansion, and regional trends, but the Q3 call featured more direct questions about macroeconomic impacts and regional weakness.
Risks and Concerns
Management cited macro uncertainty, including tariff policy and interest rates, as factors leading to lower client hiring, especially in California.
Weakness in construction, transportation/logistics, and retail in Northern and Southern California was highlighted as impacting client workforce reductions.
Harris acknowledged that workers’ compensation pricing has been trending downward for several years, creating some margin pressure, but noted optimism about recent rate increases.
The company is mitigating insurance-related risks through fully insured products and continued investments in product enhancements and geographic expansion.
Final Takeaway
Barrett Business Services, Inc. reported a quarter marked by record new client additions and expanding geographic presence, particularly in asset-light markets, despite headwinds in client hiring and regional slowdowns in California. Management reaffirmed their focus on controllable growth, product and technology rollouts, and disciplined capital returns, while adjusting full-year guidance to reflect evolving market conditions. The company sees continued opportunity in insurance rate increases and a robust sales funnel, positioning BBSI for ongoing growth with a diversified client base and strong retention.