Barrett Business Services, Inc.

Q2 2026 gross billings increased 2.6% year over year to $2.29 billion versus $2.23 billion in Q2 2025. PEO gross billings rose 2.8% to $2.28 billion, staffing revenue declined 18% to $14 million, and PEO worksite employees grew 1%; average billing per WSE per day increased 2.2%. Favorable prior-year liability and premium adjustments were $2 million versus $8.8 million a year ago, and net income per diluted share was $0.52 compared with $0.70 in the prior-year quarter. For full-year 2026, BBSI now expects gross billings growth of 3% to 4% (down from 3% to 5%), average WSE growth of 2% to 3% (down from 2% to 4%), gross margin as a percentage of gross billings of 2.7% to 2.75% (down from 2.7% to 2.85%), and an effective annual tax rate of 26% to 27%.

Gary Kramer said BBSI delivered another quarter of top-line growth and solid profitability, with stronger new business momentum partially offset by macro and geopolitical headwinds that are limiting client workforce growth. He emphasized controllable growth, better technology and product breadth, and expansion into new markets and white-collar accounts as key strategic levers. On workers’ comp, he said the market has turned, pricing is now rising, and 2026 should be the low watermark for gross margin with improvement expected in 2027.

Anthony Harris highlighted the quarter’s financial profile: gross billings of $2.29 billion, PEO gross billings of $2.28 billion, staffing revenue of $14 million, and EPS of $0.52. He said SG&A declined approximately 2%, investment income was $1.9 million, and the company used excess cash for buybacks, repurchasing $15 million of stock at an average price of $30.92 per share under the $100 million program, with $40 million remaining. BBSI ended the quarter with $68 million of unrestricted cash and investments and no debt, and returned over $39 million to shareholders over the last 6 months through dividends and repurchases.

Analysts focused on the California workers’ compensation rate increase, benefits renewal trends, and whether controllable growth can hold up through the rest of the year. Management said the 6.6% California increase is a favorable sign, but the bigger point is that the market is now getting rate and BBSI has been able to raise pricing for 8 straight months. On benefits, Gary Kramer said the book is performing as expected, renewal retention at 1/1 was strong, and medical trend still points to another double-digit rate year. On staffing and client weakness, management said staffing should grow sequentially in Q3, but year-over-year declines will remain more than double-digit for the year, and client headcount softness is now being seen beyond California, especially in construction.