Barrett Business Services (BBSI) investor relations material

Executive summary

• Revenue for Q2 2026 increased 4% year-over-year to $319.3 million, driven by a 5.1% rise in PEO services revenue, partially offset by an 18.2% decline in staffing services revenue.

• Net income for Q2 2026 declined to $12.9 million ($0.52 per diluted share) from $18.5 million ($0.70 per diluted share) in the prior-year quarter.

• Average worksite employees grew 0.5% year-over-year, reflecting continued new client additions despite hiring softness.

• Net new client acquisitions rose 17% year-over-year, offsetting macro and geopolitical headwinds that constrained existing client workforce growth.

• For the first six months of 2026, revenue rose 4.3% to $626.3 million, but the company reported a net loss of $1.9 million, primarily due to a non-recurring $11.6 million tax charge.

Financial highlights

• Gross billings increased 2.6% year-over-year to $2.29 billion in Q2 2026; PEO gross billings up 2.8% to $2.28 billion; staffing revenues declined 18% to $14 million.

• Gross margin as a percent of gross billings was 2.8% in Q2 2026, down from 3.3% in Q2 2025; gross margin as a percentage of revenue declined to 20.3% from 23.8%.

• SG&A expenses for Q2 2026 were $47.2 million (14.8% of revenue), a decrease of $1.0 million year-over-year, mainly from lower employee-related costs.

• Investment income was $1.9 million, down $400,000 year-over-year due to lower rates and balances.

• Unrestricted cash and investments totaled $67.9 million at June 30, 2026, down from $91.9 million at March 31, 2026.

Outlook and guidance

• Gross billings for 2026 expected to increase 3%-4%.

• Average worksite employee growth forecasted at 2%-3%.

• Gross margin as a percentage of gross billings expected between 2.7% and 2.75%, reflecting California workers' comp transition.

• Effective annual tax rate anticipated at 26%-27%, excluding a one-time prior-year tax credit charge.

• 2026 projected as the low point for gross margin, with improvement anticipated in 2027 as pricing actions take full effect.