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What changed in BARRETT BUSINESS SERVICES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BARRETT BUSINESS SERVICES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+164 added−149 removedSource: 10-K (2025-02-28) vs 10-K (2024-03-01)

Top changes in BARRETT BUSINESS SERVICES INC's 2024 10-K

164 paragraphs added · 149 removed · 130 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

35 edited+12 added−8 removed51 unchanged
Biggest changeWe also offer a cafeteria plan under Section 125 of the Internal Revenue Code and group health, life insurance and disability insurance plans to qualified staffing and management employees. Generally, qualified employee benefit plans are subject to provisions of both the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 ("ERISA").
Biggest changeGenerally, qualified employee benefit plans are subject to provisions of both the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 ("ERISA"). Certain highly compensated employees of the Company are allowed to participate in a nonqualified deferred compensation plan.
PEO We enter into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers’ compensation and benefits coverage (if elected) and certain other administrative functions for the client’s existing workforce.
PEO We enter into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers’ compensation (if elected) and benefits coverage (if elected) and certain other administrative functions for the client’s existing workforce.
At the branch level, profit sharing is in direct correlation to client WSE growth and workers’ compensation claims performance, reinforcing a culture focused on achievement of client goals. We also provide a comprehensive benefits package as well as an employee stock purchase plan. We seek feedback from employees regarding our benefits package through employee surveys.
At the branch level, profit sharing is in direct correlation to client WSE growth and workers’ compensation claims performance, reinforcing a culture focused on achievement of client goals. We also provide a comprehensive benefits package as well as an employee stock purchase plan to our employees. We seek feedback from employees regarding our benefits package through employee surveys.
We maintain clear guidelines for our area managers and risk management consultants, directly tying their continued employment to their diligence in understanding and addressing 5 the risks of accident or injury associated with the industries in which client companies operate and in monitoring clients’ compliance with workplace safety requirements.
We maintain clear guidelines for our area managers and risk management consultants, directly tying their continued employment to their diligence in understanding and addressing the risks of accident or injury associated with the industries in which client companies operate and in monitoring clients’ compliance with workplace safety requirements.
We provide our PEO clients access to human resource advisors, retirement plans, a learning management system and our web-based technology platform, myBBSI. We refer to employees of our PEO clients as worksite employees (“WSEs”). The client maintains physical care, custody and control of the WSEs, including the authority to hire and terminate employees.
We provide our PEO clients access to human resource advisors, retirement plans, a learning management system and our web-based technology platform, myBBSI. 3 We refer to employees of our PEO clients as worksite employees (“WSEs”). The client maintains physical care, custody and control of the WSEs, including the authority to hire and terminate employees.
In doing so, business teams focus on the objectives of each business owner and deliver planning, guidance and resources in support of those objectives. 2 Tier 1: Tactical Alignment The first stage focuses on the mutual setting of expectations and is essential to a successful client relationship.
In doing so, business teams focus on the objectives of each business owner and deliver planning, guidance and resources in support of those objectives. Tier 1: Tactical Alignment The first stage focuses on the mutual setting of expectations and is essential to a successful client relationship.
Approximately 16% of the Company’s workers’ compensation exposure is covered through self-insurance or Ecole (the “self-insured programs”). For all claims incurred under the Company’s self-insured programs, the Company retains risk of loss up to the first $3.0 million per occurrence, except in Maryland and Colorado, where the Company’s retention per occurrence is $1.0 million and $2.0 million, respectively.
Approximately 15% of the Company’s workers’ compensation exposure is covered through self-insurance or Ecole (the “self-insured programs”). For all claims incurred under the Company’s self-insured programs, the Company retains risk of loss up to the first $3.0 million per occurrence, except in Maryland and Colorado, where the Company’s retention per occurrence is $1.0 million and $2.0 million, respectively.
The insights gained through our own growth, along with the trends we see in working with more than 8,000 companies each day, define our approach to guiding business owners through the challenges associated with being an employer. BBSI’s business teams align with each business owner client through a structured three-tiered progression.
The insights gained through our own growth, along with the trends we see in working with more than 8,100 companies each day, define our approach to guiding business owners through the challenges associated with being an employer. BBSI’s business teams align with each business owner client through a structured three-tiered progression.
Insured Program The Company provides workers’ compensation coverage for client employees primarily through arrangements with fully licensed, third-party insurers (the “insured program”). Under this program, carriers issue policies or afford coverage to the Company’s clients under a program maintained by the Company. Approximately 84% of the Company’s workers’ compensation exposure is covered through the insured program.
Insured Program The Company provides workers’ compensation coverage for client employees primarily through arrangements with fully licensed, third-party insurers (the “insured program”). Under this program, carriers issue policies or afford coverage to the Company’s clients under a program maintained by the Company. Approximately 85% of the Company’s workers’ compensation exposure is covered through the insured program.
Additional Information Our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and registration statements, as well as any amendments to these filings, are accessible free of charge at our website at http://www.bbsi.com as soon as reasonably practicable after they are electronically filed with the SEC.
Additional Information Our filings with the Securities and Exchange Commission ("SEC"), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and registration statements, as well as any amendments to these filings, are accessible free of charge at our website at http://www.bbsi.com as soon as reasonably practicable after they are electronically filed with the SEC.
We make matching contributions to the 401(k) plan under a safe harbor provision, which are immediately 100% vested. We match 100% of contributions by management and staffing employees up to 3% of each participating employee's annual compensation and 50% of the employee's contributions up to an additional 2% of annual compensation.
We match 100% of contributions by management and staffing employees up to 3% of each participating employee's annual compensation and 50% of the employee's contributions up to an additional 2% of annual compensation. Matching contributions to the 401(k) plan for management and staffing employees are made under a safe harbor provision, which are immediately 100% vested.
This information is used by management to make improvements as we continuously strive to be an employer of choice. We offer various qualified employee benefit plans to our employees, including those employees for whom we are the administrative employer in a co-employment arrangement with a PEO client that so elects.
This information is used by management to make improvements as we continuously strive to be an employer of choice. We offer various qualified employee benefit plans to our employees and WSEs for whom we are the administrative employer in a co-employment arrangement with a PEO client that so elects.
The small and mid‑sized business segment is particularly attractive because: • it is large, continues to offer significant growth opportunity and remains underserved by professional services companies; • it typically has fewer in-house resources than larger businesses and, as a result, is generally more dependent on external resources; • we generally experience a relatively high client retention rate and lower client acquisition costs within this market segment; and • we have found that small to mid-sized businesses are responsive to quality of service when selecting a PEO or staffing services provider.
The small and mid‑sized business segment is particularly attractive because: • it is large, continues to offer significant growth opportunity and remains underserved by professional services companies; • it typically has fewer in-house resources than larger businesses and, as a result, is generally more dependent on external resources; • we generally experience a relatively high client retention rate and lower client acquisition costs within this market segment; and • we have found that small to mid-sized businesses are responsive to quality of service when selecting a PEO or staffing services provider. 4 Competition The business environment in which we operate is characterized by intense competition and fragmentation.
Certain highly compensated employees of the Company are allowed to participate in a nonqualified deferred compensation plan. Under the plan, participants are permitted to defer receipt for income tax purposes of up to 90% of salary and up to 100% of any incentive bonus. Participants earn a return on their deferred compensation based on investment earnings of participant-selected investments.
Under the plan, participants are permitted to defer receipt for income tax purposes of up to 90% of salary and up to 100% of any incentive bonus. Participants earn a return on their deferred compensation based on the investment performance of participant-selected investments.
We intend to expand our geographic presence as opportunities arise. We continue to refine our approach to geographic expansion, which now includes an "asset-light" entry to new markets until sufficient scale is reached to warrant a physical office location. As part of this effort to expand geographically, we have become licensed to provide PEO services nationwide.
We intend to expand our geographic presence as opportunities arise. We continue to refine our approach to geographic expansion, which now includes an "asset-light" entry to new markets until sufficient scale is reached to warrant a physical office location.
By providing our small and medium-sized business clients with access to best-in-class benefits and administration services, we are providing strategic value that improves our clients' ability to attract and retain top talent for their organizations. 7 Human Capital At December 31, 2023, we had 130,513 total employees, including 126,446 WSEs under our PEO client service agreements, 3,224 staffing services employees, 839 managerial, sales and administrative employees (together, “management employees”), and 4 executive officers.
By providing our small and medium-sized business clients with access to best-in-class benefits and administration services, we are providing strategic value that improves our clients' ability to attract and retain top talent for their organizations. 7 Human Capital At December 31, 2024, we had a total of 3,658 employees, including 870 managerial, sales and administrative employees (together, “management employees”), 4 executive officers and 2,784 staffing services employees.
Employees covered under a PEO arrangement may participate in our 401(k) plan at the sole discretion of the PEO client. Our qualified staffing and management employee benefit plans include our 401(k) plan. Beginning in 2023, qualified employees may enroll upon reaching 21 years of age and completing six months of service.
Our qualified staffing and management employee benefit plans include our 401(k) plan. Beginning in 2023, qualified employees may enroll upon reaching 21 years of age and completing six months of service.
To comply with the employer mandate provision of the Acts for our staffing and management employees, we offer health care coverage to all staffing and management employees eligible for coverage under the Acts. 8 Regulatory and Legislative Environment We are subject to the laws and regulations of the jurisdictions within which we operate, including those governing self-insured employers under the workers' compensation systems in Oregon, Maryland, and Colorado, as well as in Washington for staffing and management employees.
Regulatory and Legislative Environment We are subject to the laws and regulations of the jurisdictions within which we operate, including those governing self-insured employers under the workers' compensation systems in Oregon, Maryland, Ohio, and Colorado, as well as in Washington for staffing and management employees.
In providing this coverage, we are responsible for complying with applicable statutory requirements for workers' compensation coverage. Risk mitigation is also an important contributor to our principal goal of helping business owners operate their business more efficiently. It is in the mutual interests of the client and BBSI to commit to workplace safety and risk mitigation.
Risk mitigation is also an important contributor to our principal goal of helping business owners operate their business more efficiently. It is in the mutual interests of the client and BBSI to commit to workplace safety and risk mitigation.
We face additional competition from regional providers and we may in the future also face competition from new entrants to the field, including other staffing services companies, payroll processing companies and insurance companies.
We face additional competition from regional providers and we may in the future also face competition from new entrants to the field, including other staffing services companies, payroll processing companies and insurance companies. The principal competitive factors in the business environment in which we operate are price and level of service.
We work to manage and reduce job injury claims, identify fraudulent claims and structure optimal work programs, including modified duty. In 2023, BBSI began offering employee benefit programs to our clients. The employee benefit programs are designed to provide strategic value to our clients through access to best-in-class plans and service.
We work to manage and reduce job injury claims, identify fraudulent claims and structure optimal work programs, including modified duty. In 2023, BBSI began offering additional employee benefit programs to our clients.
Workers’ Compensation Through our client services agreement, BBSI can provide workers’ compensation coverage to its clients. We provide this coverage through a variety of methods, all of which are subject to rigorous underwriting to assess financial stability, risk factors and cultural alignment related to safety and the client’s desire to improve their operations.
We provide this coverage through a variety of methods, all of which are subject to rigorous underwriting to assess financial stability, risk factors and cultural alignment related to safety and the client’s desire to improve their operations. In providing this coverage, we are responsible for complying with applicable statutory requirements for workers' compensation coverage.
The principal competitive factors in the business environment in which we operate are price and level of service. 4 We believe that our growth is attributable to our ability to provide small and mid-sized companies with the resources and knowledge base of a large employer delivered through a local operations team.
We believe that our growth is attributable to our ability to provide small and mid-sized companies with the resources and knowledge base of a large employer delivered through a local operations team. Our level of integration with each client business provides us an additional competitive advantage.
On June 30, 2021, the Company entered into a loss portfolio transfer agreement (“LPT 2”) to remove all remaining outstanding workers’ compensation claims obligations for client policies issued under its insured program up to June 30, 2018. 6 Self-Insured Programs The Company is a self-insured employer with respect to workers' compensation coverage for all employees, including employees of PEO clients that elect to participate in our workers’ compensation program, working in Colorado, Maryland and Oregon.
Claim obligations for policies issued under the insured program between February 1, 2014 and June 30, 2018 were removed through loss portfolio transfers in 2020 and 2021. 6 Self-Insured Programs The Company is a self-insured employer with respect to workers' compensation coverage for all employees, including employees of PEO clients that elect to participate in our workers’ compensation program, working in Colorado, Maryland, Ohio, and Oregon.
Benefit plans available to clients include medical, dental and vision plans, flexible spending accounts and health savings accounts, life insurance and voluntary accident coverage, critical illness and disability coverage, among others. Categories of Services We report financial results in two categories of services: Professional Employer Services (“PEO”) and Staffing.
The new benefit programs available to clients include medical, dental and vision plans, flexible spending accounts and health savings accounts, life insurance and voluntary accident coverage, critical illness and disability coverage, among others.
Our recruiting experts maintain a deep network of professionals from which we source candidates. Through an assessment process, we gain an understanding of the short and 3 long-term needs of our clients, allowing us to identify and source the right talent for each position. We then conduct a rigorous screening process to help ensure a successful hire.
Through an assessment process, we gain an understanding of the short and long-term needs of our clients, allowing us to identify and source the right talent for each position. We then conduct a rigorous screening process to help ensure a successful hire. Clients and Client Contracts Our PEO business is typically characterized by long-term relationships that result in recurring revenue.
During 2023, we supported in excess of 8,000 PEO clients with total average WSEs of 124,306. Staffing and Recruiting Our staffing services include on-demand or short-term staffing assignments, contract staffing, direct placement, and long-term or indefinite-term on-site management. On-site management employees are BBSI management employees who are based on the client-site and whose jobs are to assist BBSI staffing employees.
During 2024, we supported in excess of 8,100 PEO clients with total average WSEs of 129,577. Staffing and Recruiting Our staffing services include on-demand or short-term staffing assignments, contract staffing, direct placement (including for PEO and non-PEO clients), and long-term or indefinite-term on-site management.
Our evolution from an entrepreneurially run company to a professionally managed organization has helped to form our view that all businesses experience inflection points at key stages of growth.
Services Overview BBSI’s core purpose is to advocate for business owners, particularly in the small and mid-sized business segment. Our evolution from an entrepreneurially run company to a professionally managed organization 2 has helped to form our view that all businesses experience inflection points at key stages of growth.
See “Forward-Looking Information” in Item 7 of Part II of this report and “Risk Factors” in Item 1A of Part I of this report. Business Strategy Our strategy is to align local operations teams with the mission of small and mid-sized business owners, driving value to their business.
Business Strategy Our strategy is to align local operations teams with the mission of small and mid-sized business owners, driving value to their business.
However, in 2023 we began offering sponsored benefits, including healthcare coverage, to eligible PEO client employees as part of our PEO service offering.
However, in 2023 we began offering 8 sponsored benefits, including healthcare coverage, to eligible PEO client employees as part of our PEO service offering. To comply with the employer mandate provision of the Acts for our staffing and management employees, we offer health care coverage to all staffing and management employees eligible for coverage under the Acts.
The number of employees at any given time may vary significantly due to business conditions at customer or client companies. We believe our employee relations with management employees are good. BBSI believes that making significant investments in the best management employee talent available allows us to leverage the value of this investment many times over.
We believe our employee relations with management employees are good. BBSI believes that making significant investments in the best management employee talent available allows us to leverage the value of this investment many times over. Additionally, we believe our Company’s success depends on our ability to attract, develop and retain our management employee and staffing workforce.
Effective July 1, 2021, the Company entered into a new arrangement for its insured program, whereby third-party insurers assumed all risk of loss for claims incurred from July 1, 2021 to June 30, 2022 (the “2021-2022 Policy”).
Effective July 1, 2021, the Company entered into a fully insured arrangement for its insured program, whereby third-party insurers assume substantially all risk of loss for claims incurred under the program. This fully insured arrangement has been extended annually and covers claims incurred between July 1, 2021 and June 30, 2025, with an option to renew through June 30, 2026.
This involves promoting diversity and treating all employees with dignity and respect, while providing our management employees with fair, market-based, competitive and equitable compensation. We motivate our management employees through a compensation package that includes a competitive base salary and the opportunity for profit sharing.
As such, we strive to be an employer of choice and promote the health, welfare and safety of our employees. This involves promoting diversity and treating all employees with dignity and respect, while providing our management employees with fair, market-based, competitive and equitable compensation.
We have PEO client services agreements with a diverse array of customers, including electronics manufacturers, various light-manufacturing industries, agriculture-based companies, transportation and shipping enterprises, food processors, telecommunications companies, public utilities, general contractors in various construction-related fields, restaurant franchises, and professional services firms. None of our clients individually represented more than 1% of our total revenues in 2023.
We have PEO client services agreements with customers in a diverse array of industries, including, among others, construction, manufacturing, transportation and warehousing, waste management and remediation services, retail, leisure and hospitality and wholesale trade. None of our clients individually represented more than 1% o f our total revenues in 2024 .
If claims develop favorably, BBSI can participate in savings up to $20.0 million, $22.5 million, and $28.5 million for the 2021-2022 Policy, 2022-2023 Policy, and 2023-2024 Policy, respectively. If claims develop adversely, additional premium may be charged up to $7.5 million under the 2021-2022 Policy.
For only the policy period from July 1, 2021 to June 30 2022, BBSI can also incur additional premium up to $7.5 million if claims develop adversely. No additional premium can be charged based on claim performance for other policy years.
Removed
We support clients with a local presence in 68 markets throughout the United States. Services Overview BBSI’s core purpose is to advocate for business owners, particularly in the small and mid-sized business segment.
Added
See “Forward-Looking Information” in Item 7 of Part II of this report and “Risk Factors” in Item 1A of Part I of this report.
Removed
Clients and Client Contracts Our PEO business is typically characterized by long-term relationships that result in recurring revenue.
Added
Common Stock Split On June 4, 2024, we amended our Charter to increase the number of authorized shares of common stock from 20,500,000 shares to 82,000,000 shares, and our Board of Directors declared a four-for-one split of the Company’s common stock effected in the form of a stock dividend (the “2024 Stock Split”).
Removed
Competition The business environment in which we operate is characterized by intense competition and fragmentation.
Added
Each stockholder of record at the close of business on June 14, 2024 received a dividend of three additional shares of common stock for each then-held share, distributed after close of trading on June 21, 2024. All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the 2024 Stock Split.
Removed
Our level of integration with each client business provides us an additional competitive advantage.
Added
The shares of common stock retain a par value of $0.01 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from additional paid-in capital to common stock.
Removed
The arrangement for the insured program was extended for claims incurred from July 1, 2022 to June 30, 2023 (the “2022-2023 Policy”) and for claims incurred from July 1, 2023 to June 30, 2024 (the “2023-2024 Policy”). The 2021-2022 Policy, 2022-2023 Policy, and 2023-2024 Policy allow for premium adjustments depending on overall policy performance.
Added
These additional employee benefit programs are offered through fully insured arrangements with third-party carriers and are designed to provide strategic value to our clients through access to best-in-class plans and service. Categories of Services We report financial results in two categories of services: Professional Employer Services (“PEO”) and Staffing.
Removed
No additional premiums may be charged if claims develop adversely under the 2022-2023 Policy and the 2023-2024 Policy.
Added
On-site management employees are BBSI management employees who are based on the client-site and whose jobs are to assist BBSI staffing employees. Our recruiting experts maintain a deep network of professionals from which we source candidates.
Removed
On June 29, 2020, the Company entered into a loss portfolio transfer agreement (“LPT 1”) to remove all outstanding workers’ compensation claims obligations for claims incurred under its insured program between February 1, 2014 and December 31, 2017.
Added
As part of this effort to expand geographically, we have become licensed to provide PEO services nationwide. 5 Workers’ Compensation Through our client services agreement, BBSI can provide workers’ compensation coverage to its clients.
Removed
Additionally, we believe our Company’s success depends on our ability to attract, develop and retain our workforce. As such, we strive to be an employer of choice and promote the health, welfare and safety of our employees.
Added
Each annual fully insured policy allows BBSI to participate in savings if claims develop favorably up to a maximum per policy year ranging from $20.5 million to $28.5 million, depending on the policy period.
Added
Premiums incurred but not paid are recorded as either current or long-term premium payable on the consolidated balance sheets based on the expected timing of the payments.
Added
We are also the administrative employer for certain limited purposes such as processing payroll and remitting payroll taxes for 132,069 WSEs in our co-employment arrangements with our PEO clients. The number of employees and WSEs at any given time may vary significantly due to business conditions at BBSI and our client companies.
Added
Because of our continuous commitment to our employees, we have recently been recognized as a Great Place to Work Certified company for our fourth consecutive year. We motivate our management employees through a compensation package that includes a competitive base salary and the opportunity for profit sharing.
Added
WSEs covered under a PEO arrangement may participate in our 401(k) plan at the sole discretion of the PEO client. We also offer a cafeteria plan under Section 125 of the Internal Revenue Code and group health, life insurance and disability insurance plans to qualified staffing and management employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

34 edited+20 added−7 removed89 unchanged
Biggest changeSeveral of these programs, including the Employee Retention Tax Credit ("ERC"), use payroll tax credits or deferrals as the mechanism to provide benefits to small businesses and employees. As such, when clients and former clients wish to utilize these programs, the associated tax forms must be filed through the PEO, which creates additional administrative effort for the PEO.
Biggest changeAdditionally, our clients may be eligible for various legislative and regulatory programs, including those established under the CARES Act and the American Rescue Plan Act, such as the Employee Retention Tax Credit (“ERC”), which use payroll tax credits or deferrals as the mechanism to provide benefits to small businesses and employees.
Important factors that may cause our trading price to decline include the factors listed below and other factors that may have a material adverse effect on our business or financial results, including those described above in this “Risk Factors” section: • actual or anticipated fluctuations in our results of operations, including a significant slowdown in our revenue growth or material increase in our workers’ compensation expense; • our failure to maintain effective internal control over financial reporting or otherwise discover material errors in our financial reporting; • imposition of significant fines or penalties or other adverse action by regulatory authorities against the Company; • adverse developments in legal proceedings involving claims against the Company; 19 • our failure to meet financial projections or achieve financial results anticipated by analysts; or • changes in our Board of Directors or management.
Important factors that may cause our trading price to decline include the factors listed below and other factors that may have a material adverse effect on our business or financial results, including those described above in this “Risk Factors” section: • actual or anticipated fluctuations in our results of operations, including a significant slowdown in our revenue growth or material increase in our workers’ compensation expense; • our failure to maintain effective internal control over financial reporting or otherwise discover material errors in our financial reporting; • imposition of significant fines or penalties or other adverse action by regulatory authorities against the Company; • adverse developments in legal proceedings involving claims against the Company; • our failure to meet financial projections or achieve financial results anticipated by analysts; or • changes in our Board of Directors or management.
As such, we are subject to several risks inherent to our status as the administrative employer, including without limitation: • claims of misconduct or negligence on the part of our employees, discrimination or harassment claims against our employees, or claims by our employees of discrimination or harassment by our clients; • immigration-related claims; • claims relating to violations of wage, hour and other workplace regulations; • claims relating to employee benefits, entitlements to employee benefits, or errors in the calculation or administration of such benefits; and 14 • possible claims relating to misuse of customer confidential information, misappropriation of assets or other similar claims.
As such, we are subject to several risks inherent to our status as the administrative employer, including without limitation: • claims of misconduct or negligence on the part of our employees, discrimination or harassment claims against our employees, or claims by our employees of discrimination or harassment by our clients; • immigration-related claims; • claims relating to violations of wage, hour and other workplace regulations; • claims relating to employee benefits, entitlements to employee benefits, or errors in the calculation or administration of such benefits; and • possible claims relating to misuse of customer confidential information, misappropriation of assets or other similar claims.
If we experience significant incidents involving any of the above-described risk areas, we could face substantial out-of-pocket losses, fines or negative publicity. In addition, such claims may give rise to litigation, which may be time consuming, distracting and costly, and could have a material adverse effect on our business.
If we experience significant incidents involving any of the above-described risk areas, we could face substantial out-of-pocket losses, fines or negative publicity. In addition, such claims may give rise to 15 litigation, which may be time-consuming, distracting and costly, and could have a material adverse effect on our business.
Violation of such laws and regulations could subject us to fines, penalties, and damages, damage our reputation, constitute a breach of our client agreements, impair our ability to obtain and renew required licenses, and 12 decrease our profitability or competitiveness. If any of these effects were to occur, our operating results and financial condition could be materially adversely affected.
Violation of such laws and regulations could subject us to fines, penalties, and damages, damage our reputation, constitute a breach of our client agreements, impair our ability to obtain and renew required licenses, and decrease our profitability or competitiveness. If any of these effects were to occur, our operating results and financial condition could be materially adversely affected.
Similarly, due to our geographic concentration in California, a natural disaster or major event that disrupts these markets or the related workforce could have an immediate and material adverse impact on our operations and profitability. Economic conditions may impact our ability to attract new clients and cause our existing clients to reduce staffing levels or cease operations.
Similarly, due to our geographic concentration in California, a natural disaster or major event that disrupts these markets or the related workforce could have an immediate and material adverse impact on our operations and profitability. 13 Economic conditions may impact our ability to attract new clients and cause our existing clients to reduce staffing levels or cease operations.
Item 1A. RI SK FACTORS In addition to other information contained in this report, the following risk factors should be considered carefully in evaluating our business. Risks Relating to Workers’ Compensation Our ability to continue our business operations under our present service model is dependent on maintaining workers' compensation insurance coverage.
Item 1A. RI SK FACTORS In addition to other information contained in this report, the following risk factors should be considered carefully in evaluating our business. 9 Risks Relating to Workers’ Compensation Our ability to continue our business operations under our present service model is dependent on maintaining workers' compensation insurance coverage.
The methods and techniques used by cyber threat actors to gain entry into our network and access our computer systems, software and data will become more advanced with the use of artificial intelligence and may become increasingly difficult or impossible to detect and prevent.
The methods and techniques used by cyber threat actors to gain entry into our network and access our computer systems, software and data will become more advanced with the use of artificial intelligence ("AI") and may become increasingly difficult or impossible to detect and prevent.
If our competitive advantages are not compelling or sustainable, then we are unlikely to increase or sustain profits and our stock price could decline. Our investment portfolio is subject to market and credit risks, which could adversely impact our financial condition or results of operations.
If our competitive advantages are not compelling or sustainable, then we are unlikely to increase or sustain profits and our stock price could decline. 17 Our investment portfolio is subject to market and credit risks, which could adversely impact our financial condition or results of operations.
To comply with the employer mandate provision of the Acts, we offer health care coverage to all temporary and permanent employees eligible for coverage under the Acts other than employees of our PEO clients, which are responsible for providing required health care coverage to their employees.
To comply with the employer mandate provision of the Acts, we offer health care coverage to all temporary and permanent employees eligible for coverage under the Acts other than employees of our PEO clients, which are responsible for providing required 16 health care coverage to their employees.
Any determination that we are not the administrative employer for purposes of ERISA could also adversely affect our ability to offer health care benefits to our PEO clients by subjecting us to additional state and federal laws and regulations, and could materially adversely affect our business, financial condition, and results of operations. 18 Changes in government regulations may result in restrictions or prohibitions applicable to the provision of employment services or the imposition of additional licensing, regulatory or tax requirements.
Any determination that we are not the administrative employer for purposes of ERISA could also adversely affect our ability to offer health care benefits to our PEO clients by subjecting us to additional state and federal laws and regulations, and could materially adversely affect our business, financial condition, and results of operations. 19 Changes in government regulations may result in restrictions or prohibitions applicable to the provision of employment services or the imposition of additional licensing, regulatory or tax requirements.
There can be no assurance that we will continue to maintain current levels of revenues. Efforts to achieve business growth intensifies pressure on retaining current clients and attracting increasing numbers of new clients. Our business is subject to risks associated with geographic market concentration. Our California operations accounted for approximately 72% of our total revenues in 2023.
There can be no assurance that we will continue to maintain current levels of revenues. Efforts to achieve business growth intensifies pressure on retaining current clients and attracting increasing numbers of new clients. Our business is subject to risks associated with geographic market concentration. Our California operations accounted for approximately 72% of our total revenues in 2024.
Our arrangement with third-party insurers provides health insurance coverage to BBSI’s PEO clients through December 31, 2024, with the possibility of additional annual renewals. If our third-party insurers are unwilling or unable to renew our arrangement in the future, we would need to seek coverage from alternative insurers.
Our arrangement with third-party insurers provides health insurance coverage to BBSI’s PEO clients through December 31, 2025, with the possibility of additional annual renewals. If our third-party insurers are unwilling or unable to renew our arrangement in the future, we would need to seek coverage from alternative insurers.
The spread of a highly infectious or contagious disease, and the response by federal, state, and local government agencies, including preventative actions taken such as shelter-in-place orders, restrictions on travel, temporary closures of businesses deemed to be high-risk or non-essential, and other government mandates, could create significant economic disruption that results in a material reduction in business operations, such as occurred during the COVID-19 pandemic.
The spread of a highly infectious or contagious disease, and the response by federal, state, and local government agencies, including preventative actions taken such as shelter-in-place orders, restrictions on travel, temporary closures of businesses deemed to be high-risk or non-essential, and other government mandates, could create significant economic disruption that results in a material reduction in business operations.
To continue to grow revenues, we are dependent on retaining current clients and attracting new clients. The Company’s revenue growth can be volatile and is dependent on same customer sales and the addition of new clients. Revenues increased 1.4% in 2023 and increased 10.4% in 2022.
To continue to grow revenues, we are dependent on retaining current clients and attracting new clients. The Company’s revenue growth can be volatile and is dependent on same customer sales and the addition of new clients. Revenues increased 7.0% in 2024 and increased 1.4% in 2023.
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Acts”) subject us to potential penalties unless we offer our employees minimum essential healthcare coverage that is affordable.
Our business is subject to risks associated with healthcare reforms. The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Acts”) subject us to potential penalties unless we offer our employees minimum essential healthcare coverage that is affordable.
We cannot provide assurance that the states in which we conduct or seek to conduct business will not: • impose additional regulations that prohibit or restrict employment-related businesses like ours; • require additional licensing or add restrictions on existing licenses to provide employment-related services; or • increase taxes or make changes in the way in which taxes are calculated for providers of employment-related services.
Our business is heavily regulated, and we cannot provide assurance that regulatory authorities in jurisdictions in which we conduct or seek to conduct business will not: • impose additional regulations that prohibit or restrict employment-related businesses like ours; • require additional licensing or add restrictions on existing licenses to provide employment-related services; or • increase taxes or make changes in the way in which taxes are calculated for providers of employment-related services.
Several of our existing or potential competitors have substantially greater financial, technical and marketing resources than we do, which may enable them to: • develop and expand their infrastructure and service offerings more quickly and achieve greater cost efficiencies; • invest in new technologies; • expand operations into new markets more rapidly; • devote greater resources to marketing; • compete for acquisitions more effectively and complete acquisitions more easily; and • aggressively price products and services and increase benefits in ways that we may not be able to match financially. 16 To compete effectively in our markets, we must target our potential clients carefully, continue to improve our efficiencies and the scope and quality of our services, and rely on our service quality, innovation, education and program clarity.
Several of our existing or potential competitors have substantially greater financial, technical and marketing resources than we do, which may enable them to: • develop and expand their infrastructure and service offerings more quickly and achieve greater cost efficiencies; • invest in new technologies; • expand operations into new markets more rapidly; • devote greater resources to marketing; • compete for acquisitions more effectively and complete acquisitions more easily; and • aggressively price products and services and increase benefits in ways that we may not be able to match financially.
We may also need to invest significant additional resources in our people, processes, controls and information security. Failure to successfully implement new service offerings, including the appropriate controls, policies and procedures, information systems, and data privacy and security, could have a material adverse effect on our business, reputation, results of operations and financial condition.
Failure to successfully implement new service offerings, including the appropriate controls, policies and procedures, information systems, and data privacy and security, could have a material adverse effect on our business, reputation, results of operations and financial condition.
These factors could have a material adverse effect on our results of operations and financial condition. Our staffing business is vulnerable to economic fluctuations. Demand for our staffing services is sensitive to changes in the level of economic activity in the regions in which we do business.
Any of these factors could adversely impact our business and financial performance. Our staffing business is vulnerable to economic fluctuations. Demand for our staffing services is sensitive to changes in the level of economic activity in the regions in which we do business.
These regulations may restrict our ability to operate these companies in the manner we believe is best, which could increase the cost of our operations, restrict our access to insurance coverage or adversely affect our liquidity. Risks Related to Ownership of our Common Stock Our stock price may be volatile or may decline, resulting in substantial losses for our stockholders.
These regulations may restrict our ability to operate these companies in the manner we believe is best, which could increase the cost of our operations, restrict our access to insurance coverage or adversely affect our liquidity.
If the IRS denies any of our clients' claims or deems clients who have received ERC through BBSI ineligible, and if the IRS or our clients attempt to hold BBSI liable for these amounts, this could have a material adverse effect on our business, results of operation and financial condition.
If the IRS determines that clients who received payroll tax credits through BBSI are ineligible, and if the tax authorities or our clients attempt to hold BBSI liable for these amounts, this could have a materially adverse effect on our business, reputation, results of operation, and financial condition.
The market price of our Common Stock has been, and may continue to be, volatile for the foreseeable future.
Risks Related to Ownership of our Common Stock Our stock price may be volatile or may decline, resulting in substantial losses for our stockholders. The market price of our Common Stock has been, and may continue to be, volatile for the foreseeable future.
Increases in unemployment claims could raise our state and federal unemployment tax rates that we may not be able to pass on to our customers. During weak economic conditions in our markets, the level of unemployment claims tends to rise as a result of employee layoffs at our clients and lack of work in our temporary staffing pool.
During weak economic conditions in our markets, the level of unemployment claims tends to rise as a result of employee layoffs at our clients and lack of work in our temporary staffing pool.
Additionally, if maintaining health insurance coverage becomes significantly more costly due to claims experience or other factors, this could also have a material adverse effect on our business and results of operations. 15 Our business is subject to risks associated with healthcare reforms.
If replacement coverage were unavailable or available only on significantly less favorable terms, our business and results of operations would be materially adversely affected. Additionally, if maintaining health insurance coverage becomes significantly more costly due to claims experience or other factors, this could also have a material adverse effect on our business and results of operations.
We generally assume credit risk associated with our clients’ employee payroll obligations, including liability for payment of salaries and wages (including payroll taxes), as well as retirement benefits. These obligations are fixed whether or not the client makes payments to us as required by our services agreement.
Because we assume the obligation to make wage, tax and regulatory payments in respect of some employees, we are exposed to client credit risks. We generally assume credit risk associated with our clients’ employee payroll obligations, including liability for payment of salaries and wages (including payroll taxes), as well as retirement benefits.
Our arrangement with fully licensed, third-party insurers under the insured program provides workers’ compensation coverage to BBSI’s PEO clients through June 30, 2024, with committed coverage through 9 June 30, 2024, and the possibility of additional annual renewals.
Our arrangement with fully licensed, third-party insurers under the insured program provides workers’ compensation coverage to BBSI’s PEO clients through June 30, 2025, with the possibility of additional annual renewals. If our fully licensed third-party insurers are unwilling or unable to renew our arrangement in the future, we would need to seek coverage from a small number of alternative insurers.
As economic activity slows down, companies often reduce their use of temporary employees before undertaking layoffs of permanent staff, resulting in decreased demand for staffing services.
As economic activity slows down, companies often reduce their use of temporary employees before undertaking layoffs of permanent staff, resulting in decreased demand for staffing services. On the other hand, during strong economic periods or tight labor markets due to other factors, we often experience shortages of qualified employees to meet customer needs.
We attempt to mitigate this risk by invoicing our clients at the end of their specific payroll processing cycle. We also carefully monitor the timeliness of our clients' payments and impose strict credit standards on our customers. If we fail to successfully manage our credit risk, our results of operations and financial condition could be materially and adversely affected.
These obligations are fixed whether or not the client makes payments to us as required by our services 14 agreement. We attempt to mitigate this risk by invoicing our clients at the end of their specific payroll processing cycle. We also carefully monitor the timeliness of our clients' payments and impose strict credit standards on our customers.
If replacement coverage were unavailable or available only on significantly less favorable terms, our business and results of operations would be materially adversely affected.
If replacement coverage were unavailable or available only on significantly less favorable terms, our business and results of operations would be materially adversely affected. We continue to have retention for certain workers' compensation claims incurred prior to July 1, 2021 in the majority of states in which we operate.
If we are unable to successfully identify appropriate acquisition candidates, negotiate favorable terms, and successfully integrate an acquisition, our business, financial condition, and results of operation could be materially and adversely affected. 17 Risks Related to Our Regulatory Environment Failure to appropriately interpret and comply with COVID-19 relief programs could materially adversely affect our business, reputation, results of operations and financial condition.
If we discover compliance or regulatory issues after an acquisition, encounter greater than anticipated costs and/or use of management time associated with evaluating potential acquisitions and integrating acquired businesses into our operations, or are unable to successfully identify appropriate acquisition candidates, negotiate favorable terms, and successfully integrate an acquisition, our business, financial condition, and results of operation could be materially and adversely affected. 18 Risks Related to Our Regulatory Environment Failure to interpret and comply with applicable federal and state payroll tax and unemployment tax laws could materially adversely affect our business, reputation, results of operations and financial condition.
This new service offering, as well as other potential future service offerings, may introduce additional risks and uncertainties to our business. Our efforts to implement new services may place substantial additional demands on our employees, as well as our information systems and technology platforms.
Our efforts to implement new services may place substantial additional demands on our employees, as well as our information systems and technology platforms. We may also need to invest significant additional resources in our people, processes, controls and information security.
As our PEO fees are based on client payroll, workforce reductions or shortages related to a future pandemic could have a material adverse effect on our business. Clients who are impacted by government restrictions and economic disruptions may experience liquidity and other financial issues, which may reduce their capacity to pay for our services.
Clients who are impacted by government restrictions and economic disruptions may experience liquidity and other financial issues, which may reduce their capacity to pay for our services. Additionally, trade policies, including tariffs or other import restrictions, may increase costs for our clients, particularly those reliant on global supply chains.
Because of this process, IRS review of our clients may further result in administrative effort for BBSI. Additionally, determining eligibility for programs such as ERC is complex and is based on company-specific data that PEOs do not possess for their clients.
When clients and former clients wish to utilize these programs, the associated tax forms must be filed through the PEO, which creates additional administrative effort for the PEO. Additionally, determining eligibility for these programs is complex and is based on company-specific data that PEOs do not possess for their clients.
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If our fully licensed third-party insurers are unwilling or unable to renew our arrangement in the future, we would need to seek coverage from a small number of alternative insurers. If replacement coverage were unavailable or available only on significantly less favorable terms, our business and results of operations would be materially adversely affected.
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Our business may be materially affected – either positively or negatively – by the emergence of disruptive new technologies or approaches enabled by the rapid pace of innovation unfolding in the artificial intelligence space.
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We continue to have retention for certain workers' compensation claims incurred prior to July 1, 2021 in the majority of states in which we operate.
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The safe and responsible integration of AI functionality as it rapidly evolves presents emerging ethical and legal challenges, and the use of such technologies may result in diminished brand trust and reputational harm. As with many innovations, AI presents risks and challenges that could significantly disrupt our business model.
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Other Risks Related to our Business and Industry New service offerings may subject us to additional risks. In August 2022, BBSI announced its plans to make certain fully insured medical and other health and welfare benefits available to qualifying worksite employees beginning in 2023.
Added
In addition, the use of AI by bad actors presents increasingly complex and sophisticated security threats to our confidential customer, employee, and Company data, and we must make additional efforts to maintain network security.
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On the other hand, during strong economic periods or tight labor markets due to other factors, we often experience shortages of qualified employees to meet customer needs. 13 Because we assume the obligation to make wage, tax and regulatory payments in respect of some employees, we are exposed to client credit risks.
Added
The regulatory landscape surrounding AI technologies is evolving, and the ways in which these technologies will be regulated by governmental authorities, self-regulatory institutions, or other regulatory authorities remains uncertain and may be inconsistent from jurisdiction to jurisdiction.
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In response to the pandemic, federal and state government agencies have enacted numerous laws and regulatory guidelines designed to help the economy, individuals and employers. Many of these legislative and regulatory programs, including the CARES Act and the American Rescue Plan Act, directly impact the Company and our clients.
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Certain jurisdictions in which we operate are considering or have proposed or enacted legislation and policies regulating AI and non-personal data, such as the recent Executive Order on AI.
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The guidance surrounding these programs can be limited and has evolved over time. Failure to appropriately interpret and comply with legal and regulatory requirements arising from the COVID-19 pandemic could harm client relationships and result in fines, penalties, and legal or regulatory action, which could have a material adverse effect on our business and reputation.
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Such regulations may result in operational costs to modify, maintain, or align our business practices, or constrain our ability to develop, deploy, or maintain these technologies. 12 Other Risks Related to our Business and Industry New service offerings may subject us to additional risks. Future new service offerings may introduce additional risks and uncertainties to our business.
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Our business is heavily regulated in most jurisdictions in which we operate.
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Higher input costs due to tariffs could lead our clients to reduce payroll expenses, delay hiring, or cut jobs, which could negatively impact our revenue. Supply chain disruptions caused by trade restrictions may also result in business slowdowns or closures, further affecting our ability to grow and retain clients.
Added
These factors could have a material adverse effect on our results of operations and financial condition. Our business depends on reliable access to labor, which may be affected by economic conditions, government policies, and public health crises.
Added
Our PEO and staffing revenue is based on client payroll, and our business growth depends on the availability of a sufficient and stable workforce for our clients. The availability of labor may be affected by various factors, including, among others, economic conditions; demographic trends, including outmigration from states in which we operate; government policies on immigration; and public health crises.
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The spread of highly infectious diseases can reduce workforce participation due to illness, quarantine requirements, or caregiving responsibilities. Economic downturns or shifts in labor market dynamics can impact workforce participation rates and overall labor availability. Additionally, changes in government administrations can result in shifts in immigration policies, which may affect our clients’ ability to recruit and retain workers.
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Stricter visa requirements, limitations on work permits, delays in processing, or reductions in visa allocations could lead to labor shortages, particularly in industries that rely on immigrant labor, such as agriculture, construction, and hospitality. Businesses that depend on seasonal labor, including those utilizing temporary work visa programs, may be especially vulnerable to such changes.
Added
If we fail to successfully manage our credit risk, our results of operations and financial condition could be materially and adversely affected. Increases in unemployment claims could raise our state and federal unemployment tax rates that we may not be able to pass on to our customers.
Added
To compete effectively in our markets, we must target our potential clients carefully, continue to improve our efficiencies and the scope and quality of our services, and rely on our service quality, innovation, education and program clarity.
Added
As the administrative employer in our co-employer relationships with our clients, we are subject to a complex and evolving set of federal, state and local payroll tax laws and regulations, including requirements related to withholding, reporting and remitting payroll taxes on behalf of our clients.
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Compliance with these laws requires significant resources, and failure to comply with payroll tax laws in any jurisdiction in which we operate could subject us to financial penalties, interest charges and other liabilities.
Added
Increasing regulatory focus on privacy and security issues and expanding laws and regulatory requirements could impact our business models and expose us to increased liability. We are subject to national data protection, privacy and security laws, and regulations that relate to our various business units and data processing activities, which may include sensitive, confidential, and personal information.
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These laws, regulations and codes may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. Government officials and regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data.
Added
This scrutiny can result in new and shifting interpretations of existing laws, thereby further impacting our business. State laws on privacy, data and related technologies create additional privacy and security compliance obligations and expand the scope of potential liability.
Added
The dynamic and evolving nature of these laws, regulations and codes, as well as their interpretation by regulators and courts, may affect our ability to implement our business models effectively and to adequately address disclosure requirements.
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Perception of our practices and services, even if unfounded, as a violation of individual privacy, data protection rights or cybersecurity requirements, may subject us to public criticism, lawsuits, investigations, claims and other proceedings by regulators, industry groups or 20 other third parties, all of which could disrupt or adversely impact our business and reputation and expose us to increased liability, fines and other punitive measures.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company also requires security awareness training for all employees to enable employees to understand their role in preventing and reporting cybersecurity incidents. 21 Reporting to the Board of Directors The CISO and Chief Information Officer (“CIO”) regularly update the Board's Risk Management Committee on cybersecurity risks that the Company faces and the risk mitigation strategies that the Company employs to respond to those risks, with meetings generally occurring quarterly.
Biggest changeReporting to the Board of Directors The CISO and Chief Information Officer (“CIO”) regularly update the Board's Risk Management Committee on cybersecurity risks that the Company faces and the risk mitigation strategies that the Company employs to respond to those risks, with meetings generally occurring quarterly.
Management’s Role in Assessing and Managing Cybersecurity Risk BBSI’s Chief Information Security Officer (“CISO”) leads our enterprise information security program and is primarily responsible for the assessment and management of the Company’s cybersecurity risk. The CISO has extensive experience in information technology and cybersecurity, including at another publicly traded company.
Management’s Role in Assessing and Managing Cybersecurity Risk BBSI’s Chief Information Security Officer (“CISO”) leads our enterprise information security program and is primarily responsible for the assessment and management of the Company’s cybersecurity risks. The CISO has extensive experience in information technology and cybersecurity, including at another publicly traded company.
Leveraging the knowledge, expertise, and resources of third-party experts, we regularly evaluate our cybersecurity risk management strategy to help us align 20 with best practices and address cybersecurity threats that could impact our ability to achieve our business objectives.
Leveraging the knowledge, expertise, and resources of third-party experts, we regularly evaluate our cybersecurity risk management strategy to help us align with best practices and address cybersecurity threats that could impact our ability to achieve our business objectives.
The Board of Directors also periodically receives reports from third-party consultants on the current cybersecurity threat environment, the results of third-party penetration testing, and the evaluation of the Company’s cybersecurity preparedness.
The 22 Board of Directors also periodically receives reports from third-party consultants on the current cybersecurity threat environment, the results of third-party penetration testing, and the evaluation of the Company’s cybersecurity preparedness.
Ongoing Monitoring and Reporting of Cybersecurity Incidents The Company has an internal security team, supplemented with third-party security partners, to consistently monitor, detect and respond to potential cybersecurity incidents. The Company has a cybersecurity incident reporting protocol that provides a mechanism for the appropriate members of management and the Board to be made aware of cybersecurity incidents.
Ongoing Monitoring and Reporting of Cybersecurity Incidents The Company has an internal security team, supplemented with third-party security partners, to regularly monitor, detect and respond to potential cybersecurity incidents. The Company has a cybersecurity incident reporting protocol that provides a mechanism for the appropriate members of management and the Board to be made aware of cybersecurity incidents.
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The Company also requires security awareness training for all internal employees to enable employees to understand their role in preventing and reporting cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNumber of Offices Branches California 20 Oregon 4 Washington 4 Arizona 2 Colorado 2 Idaho 2 Maryland 2 Nevada 2 Utah 2 Delaware 1 North Carolina 1 Pennsylvania 1 Tennessee 1 On December 31, 2023, our leases had expiration dates ranging from less than one year to seven years.
Biggest changeNumber of Offices Branches California 20 Oregon 4 Washington 4 Utah 3 Arizona 2 Colorado 2 Idaho 2 Maryland 2 Nevada 2 Delaware 1 North Carolina 1 Pennsylvania 1 Tennessee 1 On December 31, 2024, our leases had expiration dates ranging from less than one year to seven years.
Item 2. PR OPERTIES We operate through 44 branches. The following table shows the number of branches in each state. We also lease office space in other locations in our market areas which we use to recruit and place employees.
Item 2. PR OPERTIES We operate through 45 branches. The following table shows the number of branches in each state. We also lease office space in other locations in our market areas which we use to recruit and place employees.
We own our 65,300 square foot corporate headquarters building, which is located in Vancouver, Washington. 22 Item 3.
We own our 65,300 square foot corporate headquarters building, which is located in Vancouver, Washington. 23 Item 3.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32 Item 8. Financial Statements and Supplementary Data 33
Biggest changeItem 4. Mine Safety Disclosures 24 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8. Financial Statements and Supplementary Data 34

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Total Number of Approximate Dollar Value of Number of Average Price Shares Repurchased Shares that May Yet Shares Paid as Part of Publicly Be Repurchased Month Repurchased Per Share Announced Plan (1) Under the Plan (1) (in thousands) October - $ - - $ 64,083 November 12,850 108.42 12,850 62,690 December 32,950 112.54 32,950 58,982 Total 45,800 45,800 (1) On July 31, 2023, the Board of Directors authorized the repurchase of up to $75.0 million of the Company’s common stock over a two-year period beginning July 31, 2023.
Biggest changeTotal Total Number of Approximate Dollar Value of Number of Average Price Shares Repurchased Shares that May Yet Shares Paid as Part of Publicly Be Repurchased Month Repurchased Per Share Announced Plan (1) Under the Plan (1) (in thousands) Oct 1 - Oct 31, 2024 — $ — — $ 36,858 Nov 1 - Nov 30, 2024 20,700 42.88 20,700 35,970 Dec 1 - Dec 31, 2024 141,400 43.29 141,400 29,849 Total 162,100 162,100 (1) On July 31, 2023, the Board of Directors authorized the repurchase of up to $75.0 million of the Company’s common stock over a two-year period beginning July 31, 2023.
The stock performance graph has been prepared assuming that $100 was invested on December 31, 2018 in our Common Stock and the indexes shown, and that dividends are reinvested.
The stock performance graph has been prepared assuming that $100 was invested on December 31, 2019 in our Common Stock and the indexes shown, and that dividends are reinvested.
The following table summarizes information related to stock repurchases during the quarter ended December 31, 2023.
The following table summarizes information related to stock repurchases during the quarter ended December 31, 2024.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock (the "Common Stock") trades on the Global Select Market segment of The Nasdaq Stock Market under the symbol "BBSI." At February 9, 2024, there were 25 stockholders of record and approximately 8,144 beneficial owners of the Common Stock.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock (the "Common Stock") trades on the Global Select Market segment of The Nasdaq Stock Market under the symbol "BBSI." At February 7, 2025, there were 26 stockholders of record and approximately 10,741 beneficial owners of the Common Stock.
As of December 31, 2023, the Company had repurchased 161,200 shares at an aggregate purchase price of $16.0 million under the new repurchase program. 23 The following graph shows the cumulative total return at the dates indicated for the period from December 31, 2018 until December 31, 2023, for our Common Stock, The Nasdaq Composite Index, and the S&P 1500 Human Resource & Employment Services Index, a published industry index that is considered reflective of the Company’s peers.
As of December 31, 2024, the Company had repurchased 1,493,758 shares at an aggregate purchase price of $45.2 million under the new repurchase program. 24 The following graph shows the cumulative total return at the dates indicated for the period from December 31, 2019 until December 31, 2024, for our Common Stock, The Nasdaq Composite Index, and the S&P 1500 Human Resource & Employment Services Index, a published industry index that is considered reflective of the Company’s peers.
The stock price performance reflected in the graph may not be indicative of future price performance. 12/18 12/19 12/20 12/21 12/22 12/23 Barrett Business Services, Inc. 100.00 160.10 123.44 127.02 174.12 218.98 NASDAQ Composite 100.00 136.69 198.10 242.03 163.28 236.17 S&P 1500 Human Resource & Employment Services Index 100.00 122.79 123.83 187.16 139.81 148.84 24
The stock price performance reflected in the graph may not be indicative of future price performance. 12/19 12/20 12/21 12/22 12/23 12/24 Barrett Business Services, Inc. 100.00 77.10 79.34 108.75 136.77 207.11 NASDAQ Composite 100.00 144.92 177.06 119.45 172.77 223.87 S&P 1500 Human Resource & Employment Services Index 100.00 100.85 152.43 113.87 121.22 143.93 25
Removed
The new repurchase program replaces the program approved in February 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changePercentage of Total Net Revenues ($ in thousands) Years Ended December 31, 2023 2022 2021 Revenues: Professional employer services $ 982,268 91.9 % $ 937,363 88.9 % $ 843,815 88.3 % Staffing services 87,039 8.1 116,963 11.1 111,351 11.7 Total revenues 1,069,307 100.0 1,054,326 100.0 955,166 100.0 Cost of revenues: Direct payroll costs 65,042 6.1 87,944 8.3 83,821 8.8 Payroll taxes and benefits 555,758 52.0 522,392 49.5 469,888 49.2 Workers’ compensation 205,975 19.2 209,145 19.8 196,949 20.6 Total cost of revenues 826,775 77.3 819,481 77.7 750,658 78.6 Gross margin 242,532 22.7 234,845 22.3 204,508 21.4 Selling, general and administrative expenses 174,772 16.3 169,642 16.1 155,259 16.3 Depreciation and amortization 7,110 0.7 6,228 0.6 5,326 0.6 Income from operations 60,650 5.7 58,975 5.6 43,923 4.6 Other income, net 8,338 0.8 6,328 0.6 6,738 0.7 Income before income taxes 68,988 6.5 65,303 6.2 50,661 5.3 Provision for income taxes 18,376 1.7 18,035 1.7 12,582 1.3 Net income $ 50,612 4.8 % $ 47,268 4.5 % $ 38,079 4.0 % 28 We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees.
Biggest changePercentage of Total Net Revenues ($ in thousands) Years Ended December 31, 2024 2023 2022 Revenues: Professional employer services $ 1,063,386 92.9 % $ 982,268 91.9 % $ 937,363 88.9 % Staffing services 81,145 7.1 87,039 8.1 116,963 11.1 Total revenues 1,144,531 100.0 1,069,307 100.0 1,054,326 100.0 Cost of revenues: Direct payroll costs 61,010 5.3 65,042 6.1 87,944 8.3 Payroll taxes and benefits 628,534 54.9 555,758 52.0 522,392 49.5 Workers’ compensation 201,736 17.6 205,975 19.2 209,145 19.8 Total cost of revenues 891,280 77.8 826,775 77.3 819,481 77.7 Gross margin 253,251 22.2 242,532 22.7 234,845 22.3 Selling, general and administrative expenses 185,869 16.2 174,772 16.3 169,642 16.1 Depreciation and amortization 7,601 0.7 7,110 0.7 6,228 0.6 Income from operations 59,781 5.3 60,650 5.7 58,975 5.6 Other income, net 11,041 1.0 8,338 0.8 6,328 0.6 Income before income taxes 70,822 6.3 68,988 6.5 65,303 6.2 Provision for income taxes 17,829 1.6 18,376 1.7 18,035 1.7 Net income $ 52,993 4.7 % $ 50,612 4.8 % $ 47,268 4.5 % 29 We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees.
A basic premise in most actuarial analyses is that historical data and past patterns demonstrated in the incurred and paid historical data form a reasonable basis upon which to project future outcomes, absent a material change. Significant structural changes to the available data can materially impact the reserve estimation process.
A basic premise in most actuarial analyses is that historical data and past patterns demonstrated in the incurred and paid historical data form a reasonable basis upon which to project future outcomes, absent a material change. Significant structural changes to the available data can materially impact the estimation process.
The process of estimating unpaid claims and claims adjustment expense involves a high degree of judgment and is affected by both internal and external events, including changes in claims handling practices, modifications in reserve estimation procedures, changes in individuals involved in the reserve estimation process, inflation, trends in the litigation and settlement of pending claims, and legislative changes.
The process of estimating claims and claims adjustment expense involves a high degree of judgment and is affected by both internal and external events, including changes in claims handling practices, modifications in reserve estimation procedures, changes in individuals involved in the reserve estimation process, inflation, trends in the litigation and settlement of pending claims, and legislative changes.
Workers’ compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims. In addition, positive or adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’ compensation expense.
Workers’ compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims. Positive or adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’ compensation expense.
All our forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
All our forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Our business is concentrated in California, and we expect to continue to derive a majority of our revenues from this market in the future. Revenues generated in our California operations accounted for 72% of our total revenues in 2023, 73% in 2022 and 73% in 2021.
Our business is concentrated in California, and we expect to continue to derive a majority of our revenues from this market in the future. Revenues generated in our California operations accounted for 72% of our total revenues in 2024, 72% in 2023 and 73% in 2022.
A discussion of our financial condition and results of operations for 2022 compared to 2021 can be found in Part II, Item 7.
A discussion of our financial condition and results of operations for 2023 compared to 2022 can be found in Part II, Item 7.
We therefore present for purposes of analysis gross billings and wage information for the years ended December 31, 2023, 2022 and 2021.
We therefore present for purposes of analysis gross billings and wage information for the years ended December 31, 2024, 2023 and 2022.
Such factors with respect to the Company include: our ability to retain current clients and attract new clients; difficulties associated with integrating clients into our operations; economic trends in our service areas; the potential for material deviations from expected future workers’ compensation claims experience; changes in the workers’ compensation regulatory environment in our primary markets; security breaches or failures in the Company’s information technology systems; collectability of accounts receivable; changes in executive management; changes in effective payroll tax rates and federal and state income tax rates; the carrying values of deferred income tax assets and goodwill (which may be affected by our future operating results); the effects of inflation on our operating expenses and those of our clients; the impact of and potential changes to the Patient Protection and Affordable Care Act, escalating medical costs, and other health care legislative initiatives on our business; the effect of conditions in the global capital markets on our investment portfolio; and the availability of capital, borrowing capacity on our revolving credit facility, or letters of credit necessary to meet state-mandated surety deposit requirements for maintaining our status as a qualified self-insured employer for workers' compensation coverage or our insured program.
Such factors with respect to the Company include: our ability to retain current clients and attract new clients; difficulties associated with integrating clients into our operations; economic trends in our service areas and the potential effects of changing governmental policies and natural disasters; the potential for material deviations from expected future workers’ compensation claims experience; changes in the workers’ compensation regulatory environment in our primary markets; PEO client benefit costs, particularly with regard to health insurance benefits; security breaches or failures in the Company’s information technology systems; collectability of accounts receivable; changes in executive management; changes in effective payroll tax rates and federal and state income tax rates; the carrying values of deferred income tax assets and goodwill (which may be affected by our future operating results); the effects of inflation on our operating expenses and those of our clients; the impact of and potential changes to the Patient Protection and Affordable Care Act, escalating medical costs, and other health care legislative initiatives on our business; the effect of changing interest rates and conditions in the global capital markets on our investment portfolio; and the availability of capital, borrowing capacity on our revolving credit facility, or letters of credit necessary to meet state-mandated surety deposit requirements for maintaining our status as a qualified self-insured employer for workers' compensation coverage or our insured program.
To the extent a material change affecting the ultimate claim liability becomes known, 26 such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data.
To the extent a material change affecting the ultimate claim amount becomes known, such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data.
Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 6, 2023. 30 Fluctuations in Quarterly Operating Results We have historically experienced significant fluctuations in our quarterly operating results, including losses or minimal income in the first quarter of each year, and expect such fluctuations to continue in the future.
Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 1, 2024. 31 Fluctuations in Quarterly Operating Results We historically have experienced significant fluctuations in our quarterly operating results, including losses or minimal income in the first quarter of each year, and expect such fluctuations to continue in the future.
The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”). The balance in the trust account was $210.9 million and $188.2 million at December 31, 2023 and December 31, 2022, respectively.
The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”). The balance in the trust account was $197.1 million and $210.9 million at December 31, 2024 and December 31, 2023, respectively.
The decrease in workers’ compensation expense as a percentage of revenue was primarily due to lower workers' compensation costs in the current year as well as favorable prior year liability and premium adjustments of $14.9 million in 2023, compared to prior year liability and premium adjustments of $13.4 million in 2022.
The decrease in workers’ compensation expense as a percentage of revenue was primarily due to lower workers' compensation costs in the current year as well as favorable prior year liability and premium adjustments of $18.5 million in 2024, compared to prior year liability and premium adjustments of $14.9 million in 2023.
These forward-looking statements include, among others, discussion of economic conditions in our market areas and their effect on revenue levels, the lingering effects of the COVID-19 pandemic on our business operations, the competitiveness of our service offerings, the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees, our ability to attract and retain clients and to achieve revenue growth, the effect of changes in our mix of services on gross margin, labor market conditions, the adequacy of our workers' compensation reserves, the effect of changes in estimates of our future claims liabilities on our workers’ compensation reserves, including the effect of changes in our reserving practices and claims management process on our actuarial estimates, expected levels of required surety deposits and letters of credit, our ability to generate sufficient taxable income in the future to utilize our deferred tax assets, the effect of our formation and operation of two wholly owned licensed insurance subsidiaries, the risks of operation and cost of our insured program, the financial viability of our excess insurance carriers, the effectiveness of our management information systems, our relationship with our primary bank lender and the availability of financing and working capital to meet our funding requirements, litigation costs, the effect of changes in the interest rate environment on the value of our investment securities, the adequacy of our allowance for doubtful accounts, and the potential for and effect of acquisitions.
These forward-looking statements include, among others, discussion of economic conditions in our market areas, especially in California, and their effect on revenue levels; the competitiveness of our service offerings; the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees; our ability to attract and retain clients and to achieve revenue growth; the effect of changes in our mix of services on gross margin; labor market conditions; the adequacy of our workers' compensation reserves; the effect of changes in estimates of our future claims liabilities on our workers’ compensation reserves, including the effect of changes in our reserving practices and claims management process on our actuarial estimates; expected levels of required surety deposits and letters of credit; the outcome of audits; the effect of our formation and operation of two wholly owned licensed insurance subsidiaries; the risks of operation and cost of our insured program; the financial viability of our excess insurance carriers; the effectiveness of our management information systems; our relationship with our primary bank lender and the availability of financing and working capital to meet our funding requirements; litigation costs; the effect of changes in the interest rate environment on the value of our investment securities; the adequacy of our allowance for expected credit losses; and the potential for and effect of acquisitions.
Our reserves include an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary.
Our estimate of ultimate losses includes an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary.
The decrease in direct payroll costs as a percentage of revenues was primarily due to a decrease in staffing services within the mix of our customer base in 2023 as compared to 2022. Payroll taxes and benefits for 2023 totaled $555.8 million or 52.0% of revenue compared to $522.4 million or 49.5% of revenue for 2022.
The decrease in direct payroll costs as a percentage of revenues was primarily due to a decrease in staffing services within the mix of our customer base in 2024 as compared to 2023. Payroll taxes and benefits for 2024 totaled $628.5 million or 54.9% of revenue compared to $555.8 million or 52.0% of revenue for 2023.
Net cash used in financing activities in 2023 was $44.6 million compared to net cash used of $60.2 million for the comparable period of 2022. In 2023, net cash used in financing activities primarily consisted of repurchases of common stock of $34.2 million and dividend payments of $8.1 million.
Net cash used in financing activities in 2024 was $41.1 million compared to net cash used of $44.6 million for the comparable period of 2023. In 2024, net cash used in financing activities primarily consisted of repurchases of common stock of $29.1 million and dividend payments of $8.1 million.
The increase in gross margin as a percentage of revenues is primarily a result of the factors discussed within the separate components of gross margin below. Direct payroll costs for 2023 totaled $65.0 million or 6.1% of revenue compared to $87.9 million or 8.3% of revenue for 2022.
The decrease in gross margin as a percentage of revenues is primarily a result of the factors discussed within the separate components of gross margin below. Direct payroll costs for 2024 totaled $61.0 million or 5.3% of revenue compared to $65.0 million or 6.1% of revenue for 2023.
The increase in PEO services revenues was primarily attributable to an increase in average number of WSEs as well as an increase in average billing per WSE. Gross margin for 2023 totaled $242.5 million or 22.7% of revenue compared to $234.8 million or 22.3% of revenue for 2022.
The increase in PEO services revenues was primarily attributable to a 4.2% increase in average number of WSEs as well as a 3.4% increase in average billing per WSE. Gross margin for 2024 totaled $253.3 million or 22.2% of revenue compared to $242.5 million or 22.7% of revenue for 2023.
Year Ended December 31, (in thousands) 2023 2022 2021 Gross billings $ 7,716,152 $ 7,393,808 $ 6,569,986 PEO and staffing wages 6,711,115 6,425,286 5,693,903 In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings.
Year Ended December 31, (in thousands) 2024 2023 2022 Gross billings $ 8,327,091 $ 7,716,152 $ 7,393,808 PEO and staffing wages $ 7,245,093 $ 6,711,115 $ 6,425,286 In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings.
See “Note 5 - Revolving Credit Facility and Long-Term Debt” to the consolidated financial statements included in Item 8 of Part II of this report for information regarding the Company’s credit agreement with Wells Fargo Bank, N.A. 31 Contractual Obligations The Company's contractual obligations as of December 31, 2023 are summarized below: As of December 31, 2023 Payments Due by Period (in thousands) Less than 1 - 3 4 - 5 After Total 1 Year Years Years 5 Years Operating leases (1) $ 24,311 $ 7,571 $ 10,171 $ 5,767 $ 802 Total contractual obligations $ 24,311 $ 7,571 $ 10,171 $ 5,767 $ 802 (1) As of December 31, 2023, the Company has additional operating leases that have not yet commenced of $1.0 million and remaining balances on short-term operating leases of $60,332.
See “Note 5 - Revolving Credit Facility and Long-Term Debt” to the consolidated financial statements included in Item 8 of Part II of this report for information regarding the Company’s credit agreement with Wells Fargo Bank, N.A. 32 Contractual Obligations The Company's contractual obligations as of December 31, 2024 are summarized below: As of December 31, 2024 Payments Due by Period (in thousands) Less than 1 - 3 4 - 5 After Total 1 Year Years Years 5 Years Operating leases (1) $ 30,755 $ 7,772 $ 13,397 $ 7,063 $ 2,523 Total contractual obligations $ 30,755 $ 7,772 $ 13,397 $ 7,063 $ 2,523 (1) As of December 31, 2024, the Company has additional operating leases that have not yet commenced of $7.1 million and remaining balances on short-term operating leases of $0.06 million, included in the table above.
Net cash provided by operating activities in 2023 amounted to $67.2 million, compared to net cash provided of $27.8 million for the comparable period of 2022.
Net cash provided by operating activities in 2024 amounted to $10.1 million, compared to net cash provided of $67.2 million for the comparable period of 2023.
Net cash used in investing activities totaled $55.2 million in 2023, compared to net cash provided of $61.2 million for the comparable period of 2022.
Net cash provided by investing activities totaled $38.8 million in 2024, compared to net cash used of $55.2 million for the comparable period of 2023.
IBNR reserves, unlike specific case reserves, do not apply to a specific claim but rather apply to the entire population of claims arising from a specific time period.
IBNR does not apply to a specific claim but rather applies to the entire population of claims arising from a specific time period.
The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to higher average payroll tax rates in 2023, in addition to PEO client benefit costs of $10.5 million related to the availability of employee benefits to our PEO clients beginning in 2023.
The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to higher average payroll tax rates in 2024 and PEO client benefit costs of $33.4 million in 2024 compared to $10.5 million in 2023.
Property, equipment, software and 25 internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life.
Property, equipment, software and internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years.
Due to the inherent uncertainty underlying loss reserve estimates, the expenses incurred through final resolution of our liability for our workers’ compensation claims will likely vary from the related loss reserves at the reporting date. Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss reserves.
Due to the inherent uncertainty underlying loss estimates, the ultimate expense incurred will likely vary from the related loss estimate at the reporting date. Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss estimates.
The decrease in cash at December 31, 2023 as compared to December 31, 2022 was primarily due to the purchase of investments and restricted investments, decreased workers' compensation claim liabilities, and repurchases of common stock partially offset by increased premium payable, net income, and proceeds from the sale and maturities of investments and restricted investments.
The increase in cash at December 31, 2024 as compared to December 31, 2023 was primarily due to proceeds from the sale and maturities of investments and restricted investments, increased accrued payroll and related benefits, and net income, partially offset by increased trade accounts receivable, decreased workers' compensation claim liabilities, purchases of investments and restricted investments, and repurchases of common stock.
Corporate-level operating expenses consist primarily of executive and office staff payroll and personnel related costs, professional and legal fees, travel, occupancy costs, information systems costs, and executive and corporate staff incentive compensation. Depreciation and amortization represent depreciation of property and equipment, leasehold improvements, software and internally developed software costs.
Selling, general and administrative expenses consist primarily of payroll and personnel related costs, incentive compensation, information systems costs, rent and professional and legal fees. Depreciation and amortization represent depreciation of property and equipment, leasehold improvements, software and internally developed software costs.
Liquidity and Capital Resources The Company's cash balance of $74.8 million, which includes cash, cash equivalents, and restricted cash, decreased $32.5 million for the twelve months ended December 31, 2023, compared to an increase of $28.7 million for the comparable period of 2022.
Liquidity and Capital Resources The Company's cash balance of $82.6 million, which includes cash, cash equivalents, and restricted cash, increased $7.7 million for the twelve months ended December 31, 2024, compared to a decrease of $32.5 million for the comparable period of 2023.
Revenue for 2023 totaled $1,069.3 million, an increase of $15.0 million or 1.4% over 2022, which reflects an increase in the Company’s PEO service revenue of $44.9 million or 4.8% and a decrease in staffing services revenue of $29.9 million or 25.6%.
Revenue for 2024 totaled $1,144.5 million, an increase of $75.2 million or 7.0% over 2023, which reflects an increase in the Company’s PEO service revenue of $81.1 million or 8.3% and a decrease in staffing services revenue of $5.9 million or 6.8%.
The increase of $5.2 million in SG&A expense was primarily attributable to increased employee-related costs. Other income, net for 2023 totaled $8.3 million compared to other income of $6.3 million for 2022. The increase was primarily attributable to an increase in investment income in 2023. Our effective income tax rate for 2023 was 26.6% compared to 27.6% for 2022.
Other income, net for 2024 totaled $11.0 million compared to other income of $8.3 million for 2023. The increase was primarily attributable to an increase in investment income in 2024. Our effective income tax rate for 2024 was 25.2% compared to 26.6% for 2023.
We disclaim any obligation to publicly announce any revisions to any of the forward-looking statements contained herein to reflect future events or developments. 27 Results of Operations The following table sets forth the percentages of total revenues represented by selected items in the Company's consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021, included in Item 8 of Part II of this report.
Results of Operations The following table sets forth the percentages of total revenues represented by selected items in the Company's consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022, included in Item 8 of Part II of this report.
In 2023, net cash used in investing activities consisted primarily of purchase of investments and restricted investments of $71.1 million and purchase of property, equipment and software of $11.8 million, partially offset by proceeds from the sale and maturity of investments and restricted investments of $27.6 million.
In 2024, net cash provided by investing activities consisted primarily of proceeds from the sale and maturity of investments and restricted investments of $90.8 million, partially offset by the purchases of investments and restricted investments of $37.9 million and the purchase of property, equipment and software of $14.2 million.
Year Ended December 31, 2023 % Change 2022 % Change 2021 Average WSEs 124,306 1.9 % 122,001 8.0 % 112,928 Ending WSEs 126,446 3.4 % 122,306 5.3 % 116,154 29 Years Ended December 31, 2023 and 2022 Net income for 2023 was $50.6 million compared to net income of $47.3 million for 2022.
Year Ended December 31, 2024 Year-over-year % Growth 2023 Year-over-year % Growth 2022 Average WSEs 129,577 4.2 % 124,306 1.9 % 122,001 Ending WSEs 132,069 4.4 % 126,446 3.4 % 122,306 30 Years Ended December 31, 2024 and 2023 Net income for 2024 was $53.0 million compared to net income of $50.6 million for 2023.
Workers’ compensation expense for 2023 totaled $206.0 million or 19.3% of revenue compared to $209.1 million or 19.8% of revenue for 2022.
Workers’ compensation expense for 2024 totaled $201.7 million or 17.6% of revenue compared to $206.0 million or 19.2% of revenue for 2023.
Diluted net income per share for 2023 was $7.39 compared to diluted income per share of $6.54 for 2022.
Diluted net income per share for 2024 was $1.98 compared to diluted income per share of $1.85 for 2023.
Percentage of Gross Billings Year Ended December 31, 2023 2022 2021 PEO and staffing wages 87.0 % 86.9 % 86.7 % Payroll taxes and benefits 7.2 % 7.0 % 7.2 % Workers' compensation 2.7 % 2.9 % 3.0 % Gross margin 3.1 % 3.2 % 3.1 % The presentation of revenue on a net basis and the relative contributions of staffing and PEO services revenue can create volatility in our gross margin as a percentage of revenue.
Percentage of Gross Billings Year Ended December 31, 2024 2023 2022 PEO and staffing wages 87.0 % 87.0 % 86.9 % Payroll taxes and benefits 7.6 % 7.2 % 7.0 % Workers' compensation 2.4 % 2.7 % 2.9 % Gross margin 3.0 % 3.1 % 3.2 % We refer to employees of our PEO clients as worksite employees (“WSEs”).
In 2023, net cash provided by operating activities was primarily due to increased premium payable of $54.2 million, net income of $50.6 million, and increased accrued payroll, payroll taxes and related benefits of $12.7 million, partially offset by decreased workers’ compensation claims liabilities of $51.2 million.
In 2024, net cash provided by operating activities was primarily due to increased accrued payroll and related benefits of $55.2 million and net income of $53.0 million, largely offset by increased trade accounts receivable of $63.1 million and decreased workers’ compensation claims liabilities of $39.4 million.
Actuaries exercise a considerable degree of judgment in the evaluation of these factors and the need for such actuarial judgment is more pronounced when faced with material uncertainties.
Actuaries exercise a considerable degree of judgment in the evaluation of these factors and the need for such actuarial judgment is more pronounced when faced with material uncertainties. 27 To illustrate the sensitivity of changes in our estimate of workers’ compensation costs, a 5% increase in estimated ultimate losses for 2024 would result in a $0.5 million increase in workers’ compensation expense, and a 5% decrease in estimated ultimate losses would result in a $7.1 million decrease to workers’ compensation expense.
Critical Accounting Policies and Estimates We have identified the following accounting estimate as critical to our business and the understanding of our results of operations.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. 26 Critical Accounting Estimate We have identified the following accounting estimate as critical to our business and the understanding of our results of operations.
Additional risk factors affecting our business are discussed in Item 1A of Part I of this report.
Additional risk factors affecting our business are discussed in Item 1A 28 of Part I of this report. We disclaim any obligation to publicly announce any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Selling, general and administrative (“SG&A”) expenses for 2023 totaled $174.8 million or 16.3% of revenue compared to $169.6 million or 16.1% of revenue for 2022. The increase as a percentage of revenue was primarily due to the decrease in staffing services within the mix of our customer base.
Selling, general and administrative (“SG&A”) expenses for 2024 totaled $185.9 million or 16.2% of revenue compared to $174.8 million or 16.3% of revenue for 2023. The increase of $11.1 million in SG&A expense was primarily attributable to increased employee-related costs, including increased variable employee compensation and incentive pay related to stronger financial results compared to 2023.
Workers' Compensation Reserves We recognize our liability for the ultimate payment of incurred claims and claims adjustment expenses by establishing a reserve that represents our estimates of future amounts necessary to pay claims and related expenses with respect to workplace injuries that have occurred.
Workers' Compensation Costs For all claims incurred under the Company’s workers’ compensation programs, we record an estimate for the total amount of workers’ compensation costs, which represents the amount necessary to pay claims and related expenses, including premiums to third-party insurers, with respect to workplace injuries that have occurred under our various workers’ compensation insurance programs.
Removed
Selling, general and administrative expenses represent both branch office and corporate-level operating expenses. Branch operating expenses consist primarily of branch office staff payroll and personnel related costs, advertising, rent, office supplies, professional and legal fees and branch incentive compensation.
Added
This asymmetric impact on workers’ compensation expense is due to our insured program, which limits our expense if claim costs increase but passes through savings if claim costs are lower than expected. We believe that the amounts that we have recorded for our estimated workers’ compensation costs are reasonable.
Removed
We believe that the amounts recorded for our estimated liabilities for workers’ compensation claims, which are based on informed judgment, analysis of data, actuarial estimates, and analysis of other trends associated with the Company’s historical universe of claims data, are reasonable.
Removed
Generally, a relative increase in PEO services revenue will result in a higher gross margin as a percentage of revenue. Improvement in gross margin percentage occurs because incremental client services revenue dollars are reported as revenue net of all related direct payroll and safety incentive costs. We refer to employees of our PEO clients as worksite employees (“WSEs”).

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed2 unchanged
Biggest changeOutstanding borrowings on the Company's line of credit bear interest at a variable market rate, which makes the cost of borrowing on the line of credit susceptible to changing interest rates. At December 31, 2023, the Company had no outstanding borrowings on its line of credit. 32
Biggest changeOutstanding borrowings on the Company's line of credit bear interest at a variable market rate, which makes the cost of borrowing on the line of credit susceptible to changing interest rates. At December 31, 2024, the Company had no outstanding borrowings on its line of credit. 33
We attempt to limit our investment portfolio's exposure to market risk through low investment turnover and diversification. Based on the Company's overall interest exposure at December 31, 2023, a 50 basis point increase in market interest rates would have a $5.0 million downward effect on the fair value of the Company's investment portfolio.
We attempt to limit our investment portfolio's exposure to market risk through low investment turnover and diversification. Based on the Company's overall interest exposure at December 31, 2024, a 50 basis point increase in market interest rates would have a $4.2 million downward effect on the fair value of the Company's investment portfolio.

Other BBSI 10-K year-over-year comparisons