Barrett Business Services (BBSI 8.47%), a provider of business management solutions and professional employer organization (PEO) services for small and mid-sized businesses, reported financial results for the second quarter of fiscal 2025 on August 6, 2025. The company posted GAAP revenue and earnings above analyst expectations in Q2 2025, with reported GAAP revenue of $307.7 million versus the $299.8 million estimate, and GAAP earnings per share of $0.70, outpacing the $0.6875 consensus. The period saw strong net new client additions and improved workers' compensation costs, though existing client hiring remained muted. Management increased full-year 2025 guidance for gross billings (to 9%–10%) and average worksite employee growth (to 6%–8%), reflecting continued business momentum.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.70 | $0.69 | $0.62 | 12.9% |
| Revenue (GAAP) | $307.7 million | N/A | $279.7 million | 10.0% |
| Gross Billings | $2.23 billion | $2.03 billion | 9.9% | |
| Net Income | $18.5 million | $16.7 million | 10.8% | |
| Average Worksite Employees | 138,969 | 128,734 | 8.0% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding Barrett Business Services’ Business Model and Strategic Focus
Barrett Business Services operates as a business management solutions provider, specializing in professional employer organization (PEO) services for smaller companies. Through its services, it handles human resource administration, payroll processing, and workers’ compensation, freeing up clients to focus on their core operations.
The company differentiates itself by offering an integrated management platform. This approach combines HR outsourcing with consulting support, helping clients manage personnel needs and meet regulatory requirements. The firm emphasizes localized, decentralized service teams that work closely with client companies to tailor offerings, nurture relationships, and deliver responsive support. Its success depends on adding new clients, expanding its product suite (like healthcare benefits and HR technology), managing insurance cost risks, and maintaining compliance across regulatory environments.
Quarter in Review: Growth Drivers and Operational Developments
During the quarter, Revenue increased 10% and net income rose 10.8% compared to Q2 2024. Revenue (GAAP) reached $307.7 million, and Earnings per share (GAAP) grew to $0.70. The company’s gross billings—a non-GAAP measure of all client billings before deduction of direct staffing costs—rose 10% year-over-year, highlighting continued expansion in its core PEO offering.
Net new client additions were a critical factor, driving a year-over-year increase of 8.0% in average worksite employees, from 128,734 to 138,969. Management noted that “sustained momentum in BBSI Benefits”—the firm’s healthcare product suite—was a key factor in landing new customers. The BBSI Benefits platform, which as of April 2025 covers more than 17,500 participants, exceeded expectations for participant growth, especially in California where real uptake outpaced estimates by 2.5 times in just seven months.
The company also rolled out an applicant tracking system in March 2025, a software product that allows clients to manage job postings and integrate those seamlessly into payroll and timekeeping. While still early, initial client feedback was positive.
Risk management, particularly around workers’ compensation expenses, remained strong. Workers’ compensation expense as a percent of gross billings fell to 2.1%, down from 2.5% in Q2 2024, partly due to favorable prior-year liability and premium adjustments totaling $8.8 million. These adjustments lower the company’s current-year expense but may not recur at the same level in future quarters. The company’s staffing services, which comprise a smaller share of total revenue, experienced a decline earlier in 2025.—Staffing revenue fell 11.5% to $17.5 million compared to Q2 2024.—continuing a recent trend of softer demand in that area.
Capital returned to shareholders included $8.0 million in share repurchases and a dividend payout of $2.0 million. The company also authorized a new $100 million stock repurchase program, set to run for two years beginning August 4, 2025. For Q3, a dividend of $0.08 per share was declared.
Looking Forward: Guidance and Monitor Points for Investors
Management raised guidance for the remainder of fiscal 2025. Expected gross billings growth rose to a range of 9% to 10%, up from a previous range of 7% to 9% for 2025. Average worksite employee growth is now anticipated in the 6% to 8% band, compared to the earlier 4% to 6% for 2025. Gross margin guidance was also narrowed and nudged upward at the low end, with a projected range of 2.9% to 3.05% of gross billings. The company expects an effective annual tax rate between 26% and 27%.
Looking ahead, investors should watch for continued traction in client additions and adoption of value-added services such as BBSI Benefits and new HR technology. While net new clients remain a central driver, management cautions that existing client hiring is sluggish, reflecting broader macroeconomic caution. Ongoing weakness in the staffing segment and one-time insurance adjustments are other factors to monitor for potential volatility in results. The quarterly dividend was maintained at $0.08 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
