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What changed in BARRETT BUSINESS SERVICES INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BARRETT BUSINESS SERVICES INC's 2024 and 2025 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 2025 report.

+201 added−174 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-28)

Top changes in BARRETT BUSINESS SERVICES INC's 2025 10-K

201 paragraphs added · 174 removed · 158 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

44 edited+7 added−8 removed46 unchanged
Biggest changeAt 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.
Biggest changeWe motivate our management employees through a compensation package that includes a competitive base salary and the opportunity for profit sharing and other incentive compensation. 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.
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.
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 management and staffing employees.
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.
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 has helped to form our view that all businesses experience inflection points at key stages of growth.
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.
These 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.
Most states require employers to maintain workers' compensation insurance or otherwise demonstrate financial responsibility to meet workers' compensation obligations to employees. The benefits payable for various categories of claims are determined by state regulation and vary with the severity and nature of the injury or illness and other specified factors.
Most states 5 require employers to maintain workers' compensation insurance or otherwise demonstrate financial responsibility to meet workers' compensation obligations to employees. The benefits payable for various categories of claims are determined by state regulation and vary with the severity and nature of the injury or illness and other specified factors.
As an employer, we are subject to all federal statutes and regulations governing our employer-employee relationships for staffing and management employees. Subject to the discussion of risk factors below, we believe that our operations comply in all material respects with applicable federal statutes and regulations.
As an employer, we are subject to all federal statutes and regulations governing our employer-employee relationships for staffing and management employees. Subject to the discussion of risk factors below, we 8 believe that our operations comply in all material respects with applicable federal statutes and regulations.
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.
Approximately 14% 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 8,100 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.
The insights gained through our own growth, along with the trends we see in working with more than 8,200 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 85% 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 86% of the Company’s workers’ compensation exposure is covered through the insured program.
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.
The benefit programs available to our clients include medical, dental and vision plans, flexible spending accounts and health savings accounts, life insurance and voluntary accident coverage, and critical illness and disability coverage, among others.
It begins with a process of assessment and discovery in which the business owner’s business objectives, attitudes, and culture are aligned with BBSI’s processes, controls and culture. This stage includes an implementation process, which addresses the administrative components of employment.
It begins with a process of assessment and discovery in which the business owner’s 2 business objectives, philosophies and culture are aligned with BBSI’s processes, controls and culture. This stage includes an implementation process, which addresses the administrative components of employment.
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 maintain clear guidelines for our area managers and risk management consultants, directly tying their incentive compensation 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.
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.
The small and mid‑sized business sector 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.
Claims Management As a result of our status as a self-insured employer in four states and our remaining retention arrangements, our workers' compensation expense is tied directly to the incidence and severity of covered workplace injuries. We seek to contain our workers' compensation costs through a comprehensive approach to claims management.
Claims Management As a result of our status as a self-insured employer in four states, our remaining retention arrangements, and the premium adjustments allowable under our fully insured policies, our workers' compensation expense is tied directly to the incidence and severity of covered workplace injuries. We seek to contain our workers' compensation costs through a comprehensive approach to claims management.
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 .
We have PEO client services agreements with customers in a diverse array of industries, including, among others, construction, waste management and remediation services, manufacturing, transportation and warehousing, health care, leisure and hospitality, retail, professional and advisory services and wholesale trade. None of our clients individually represented more than 1% of our total revenues in 2025.
We use managed-care systems to reduce medical costs and keep time-loss costs to a minimum by assigning injured workers, whenever possible, to short-term assignments which accommodate the workers' physical limitations. We believe that these assignments minimize both time actually lost from work and covered time-loss costs. We engage a third-party claims administrator ("TPA") to provide the primary claims management expertise.
We use managed-care systems to reduce medical costs and keep time-loss costs to a minimum by assigning injured workers, whenever possible, to short-term assignments which accommodate the workers' physical limitations. We believe that these assignments minimize both time actually lost from work and covered 6 time-loss costs.
Technology Platform Our client-facing technology platform, myBBSI, includes both internally developed and licensed software which gives our clients a wide range of tools, including the ability to process payroll, collect and process time and attendance information, manage human resource information including employee onboarding and termination, as well as compensation, benefits, and payroll tax reporting.
Our level of integration with each client business provides us an additional competitive advantage. 4 Technology Platform Our client-facing technology platform, myBBSI, includes both internally developed and licensed software which gives our clients a wide range of tools, including the ability to process payroll, collect and process time and attendance information, manage human resource information including employee onboarding and termination, as well as compensation, benefits, and payroll tax reporting.
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.
We work to manage and reduce job injury claims, identify fraudulent claims and structure optimal work programs, including modified duty. BBSI also offers employee benefit programs to our clients.
Because each PEO client is considered to be the sole employer in the application of any rule or law included within the scope of the Acts, we are not required to offer health care coverage to the WSEs of our PEO clients.
Although we are not required to offer health care coverage to the WSEs of our PEO clients, because each PEO client is considered to be the sole employer in the application of any rule or law included within the scope of the Acts, we offer sponsored benefits, including healthcare coverage, to eligible PEO client employees as part of our PEO service offering.
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.
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 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.
We intend to expand our geographic presence as opportunities arise. We continue to refine our approach to geographic expansion, which 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 believe our claims management program has resulted in a reduction in the frequency of fraudulent claims and in accidents in which the use of illicit drugs appears to have been a contributing factor. Sponsored Benefits In 2023, BBSI began offering employee benefits to its PEO client employees.
We also maintain a corporate-wide pre-employment drug screening program and a post-injury drug test program. We believe our claims management program has resulted in a reduction in the frequency of fraudulent claims and in accidents in which the use of illicit drugs appears to have been a contributing factor. Sponsored Benefits BBSI offers employee benefits to its PEO client employees.
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.
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.
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.
The Company maintains 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 covers claims incurred between July 1, 2021 and June 30, 2026.
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.
For all other policy years, no additional premiums can be charged based on claim performance. 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.
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.
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.
Typical claims management procedures include performing thorough and prompt on-site investigations of claims filed by employees, working with physicians to encourage efficient medical management of cases, denying questionable claims and attempting to negotiate early settlements to eliminate future adverse development of claims costs. We also maintain a corporate-wide pre-employment drug screening program and a post-injury drug test program.
We engage a third-party claims administrator ("TPA") to provide the primary claims management expertise. Typical claims management procedures include performing thorough and prompt on-site investigations of claims filed by employees, working with physicians to encourage efficient medical management of cases, denying questionable claims and attempting to negotiate early settlements to eliminate future adverse development of claims costs.
These referral partners facilitate introductions to business owners on our behalf, typically in exchange for a fee equal to a small percentage of payroll. We see two key drivers to our growth: • Increase market share in existing markets. We seek to support, strengthen and expand branch office operations through the ongoing development of business teams.
We see two key drivers to our growth: • Increase market share in existing markets. We seek to support, strengthen and expand branch office operations through the ongoing development of business teams.
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.
We provide our PEO clients with access to human resource advisors and a human resources information system (HRIS), 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”).
Growth Strategy We believe our clients are one of our best advocates and powerful drivers of referral-based growth. In each market, operations teams provide expertise, consultation and support to our clients, driving growth and supporting retention.
Growth Strategy We believe our clients are our best advocates and powerful drivers of referral-based growth. In each market, operations teams provide expertise, consultation and support to our clients, driving growth and supporting retention. We anticipate that by adding business teams to existing branches, we can achieve incremental growth in those markets, driven by our reputation and by client referrals.
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.
We then conduct a rigorous screening process to help ensure a successful hire. 3 Clients and Client Contracts Our PEO business is typically characterized by long-term relationships that result in recurring revenue.
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.
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.
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.
To comply with the employer mandate provision of the Acts for our staffing and management employees, we offer health care coverage to all management and staffing employees eligible for coverage under the Acts.
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.
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.
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.
The number of employees and WSEs at any given time may vary significantly due to business conditions at BBSI and our 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.
Our business growth has three primary sources: referrals from existing clients, direct business-to-business sales efforts by our area managers and business development managers, and an extensive referral network. Partners in our referral network include insurance brokers, financial advisors, attorneys, CPAs, and other business professionals who can facilitate an introduction to prospective clients.
In most markets, business development efforts are led by area managers and are further supported by business development managers. Our business growth has three primary sources: referrals from existing clients, direct business-to-business sales efforts by our area managers and business development managers, and an extensive referral network.
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.
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.
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.
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. Our qualified staffing and management employee benefit plans include our 401(k) plan. Qualified employees may 7 enroll upon reaching 21 years of age and completing six months of service.
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.
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. Because of our continuous commitment to our employees, we have recently been recognized as a Great Place to Work Certified company for our fifth consecutive year.
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.
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. On-site management employees are BBSI management employees who are based on the client-site and whose jobs are to assist BBSI staffing employees.
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.
The Company's fully insured policies allow for return premiums if claims develop favorably, ranging from $20.0 million to $30.0 million, depending on the policy period. For the policy period beginning July 1, 2021, BBSI can incur additional premiums up to $7.5 million if claims develop adversely.
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.
Human Capital At December 31, 2025, we had a total of 3,197 employees, including 896 managerial, sales and administrative employees (together, “management employees”), 4 executive officers and 2,297 staffing services employees. We are also the administrative employer for certain limited purposes such as processing payroll and remitting payroll taxes for 138,605 WSEs in our co-employment arrangements with our PEO clients.
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.
Additionally, we believe our Company’s success depends on our ability to attract, develop and retain our management employee and staffing workforce. As such, we strive to be an employer of choice and promote the health, welfare and safety of our employees.
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.
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. This information is used by management to make improvements as we continuously strive to be an employer of choice.
Removed
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.
Added
The client maintains physical care, custody and control of the WSEs, including the authority to hire and terminate employees. During 2025, we supported in excess of 8,200 PEO clients with total average WSEs of 138,218.
Removed
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”).
Added
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 long-term needs of our clients, allowing us to identify and source the right talent for each position.
Removed
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.
Added
Competition The business environment in which we operate is characterized by intense competition and fragmentation.
Removed
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.
Added
Partners in our referral network include insurance brokers, financial advisors, attorneys, CPAs, and other business professionals who can facilitate an introduction to prospective clients. These referral partners facilitate introductions to business owners on our behalf, typically in exchange for a fee equal to a small percentage of payroll.
Removed
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.
Added
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.
Removed
We anticipate that by adding business teams to existing branches, we can achieve incremental growth in those markets, driven by our reputation and by client referrals. In most markets, business development efforts are led by area managers and are further supported by business development managers.
Added
Beginning in 2026, we are required to disclose information regarding the Company’s greenhouse gas emissions and climate-related risks under California’s Climate Corporate Data Accountability Act (CCDAA) and the Climate-Related Financial Risk Act (CRFRA). We are not currently materially impacted by any other state or federal environmental regulations.
Removed
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.
Added
However, in recent years, an increasing number of state and federal laws and regulations have been enacted or proposed that require new climate and environmental-related disclosures. Therefore, we may in the future be subject to additional state or federal environmental regulations or disclosure requirements.
Removed
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur 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.
Biggest changeOur business depends on reliable access to labor, which may be affected by economic conditions, government policies, and public health crises. 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.
If we lose the services of one of our executive officers or a significant number of our senior managers, our results of operations likely would be adversely affected. We depend on attracting and retaining qualified employees; during periods of economic growth, our costs to do so increase and attracting and retaining people becomes more difficult.
If we lose the services of one of our executive officers or a significant number of our senior managers, our results of operations would likely be adversely affected. We depend on attracting and retaining qualified employees; during periods of economic growth, our costs to do so increase and attracting and retaining people becomes more difficult.
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.
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 15 • possible claims relating to misuse of customer confidential information, misappropriation of assets or other similar claims.
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.
In addition, 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.
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.
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.
These changes may impact the services we provide to our clients or the processes we have in place to support our operations, which could have an adverse effect on our business. 11 We could be subject to reduced revenues, increased costs, liability claims, or harm to our reputation as a result of data theft, cyberattacks or other security vulnerabilities.
These changes may impact the services we provide to our clients or the processes we have in place to support our operations, which could have an adverse effect on our business. We could be subject to reduced revenues, increased costs, liability claims, or harm to our reputation as a result of data theft, cyberattacks or other security vulnerabilities.
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.
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 12 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. 13 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. Economic conditions may impact our ability to attract new clients and cause our existing clients to reduce staffing levels or cease operations.
Any changes in applicable laws and regulations may make it more difficult or expensive for us to do business, inhibit expansion of our business, or result in additional expenses that limit our profitability or decrease our ability to attract and retain clients. We may find it difficult to expand our business into additional states due to varying state regulatory requirements.
Any changes in applicable laws and regulations may make it more difficult or expensive for us to do business, inhibit expansion of our business, or result in additional expenses that limit our profitability or decrease our ability to attract and retain clients. 20 We may find it difficult to expand our business into additional states due to varying state regulatory requirements.
For claims incurred under the Company’s self-insured programs prior to July 1, 2020, the Company retains risk of loss up to the first $5.0 million per occurrence, except in Maryland and Colorado, where the retention per occurrence is $1.0 million and $2.0 million, respectively.
For claims incurred under the Company’s 9 self-insured programs prior to July 1, 2020, the Company retains risk of loss up to the first $5.0 million per occurrence, except in Maryland and Colorado, where the retention per occurrence is $1.0 million and $2.0 million, respectively.
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.
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.
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.
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.
If current economic conditions were to weaken further, these forces may result in decreased revenues due both to the downsizing of our current clients and increased difficulties in attracting new clients in a poor economic environment.
If current economic conditions were to weaken, these forces may result in decreased revenues due both to the downsizing of our current clients and increased difficulties in attracting new clients in a poor economic environment.
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.
Our arrangement with fully licensed, third-party insurers under the insured program provides workers’ compensation coverage to BBSI’s PEO clients through June 30, 2026, 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.
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.
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 AI and may become increasingly difficult or impossible to detect and prevent.
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.
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 Related to Workers’ Compensation Our ability to continue our business operations under our present service model is dependent on maintaining workers' compensation insurance coverage.
If we are determined not to be an “employer” under certain laws and regulations, our clients may stop using our services, and we may be subject to additional liabilities. We are the administrative employer in our co-employment relationships under the various laws and regulations of the IRS and the U.S. Department of Labor.
If we are determined not to be an “employer” under certain laws and regulations, our clients may stop using our services, and we may be subject to additional liabilities. We are the administrative employer sponsoring single-employer plans in our co-employment relationships under the various laws and regulations of the IRS and the U.S. Department of Labor.
Additionally, we began offering employee health and welfare benefits to our PEO clients beginning in 2023. We cannot be certain that compliant insurance coverage will remain available to us on reasonable terms, and we could face additional risks arising from future changes to or repeal of the Acts or changed interpretations of our obligations under the Acts.
Additionally, we offer employee health and welfare benefits to our PEO clients. We cannot be certain that compliant insurance coverage will remain available to us on reasonable terms, and we could face additional risks arising from future changes to or repeal of the Acts or changed interpretations of our obligations under the Acts.
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.
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, including through the use of AI technologies.
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.
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 competitors include companies that are engaged in staffing services such as Robert Half International Inc., Kelly Services, Inc., and ManpowerGroup Inc.; companies that are focused on co-employment, such as Insperity, Inc., and TriNet Group, Inc.; and companies that primarily provide payroll processing services, such as Automatic Data Processing, Inc. and Paychex, Inc.
Our competitors include companies that are engaged in staffing services such as Robert Half International Inc., Kelly Services, Inc., and ManpowerGroup Inc.; companies that are focused on co-employment, such as Insperity, Inc., and TriNet Group, Inc.; and human capital management companies, such as Automatic Data Processing, Inc. and Paychex, Inc.
New service offerings, including health care benefits, may also introduce additional legislative and regulatory requirements with which we are not familiar, or from which we are currently exempt.
New or highly regulated service offerings, such as health care benefits, may also introduce additional legislative and regulatory requirements with which we are not familiar, or from which we are currently exempt.
Thus, for claims incurred before July 1, 2020, the Company has financial risk for most workers’ compensation claims under $5.0 million on a per occurrence basis, except for claims transferred under the insured program as part of LPT 1 and LPT 2.
Thus, for claims incurred before July 1, 2020, the Company has financial risk for most workers’ compensation claims under $5.0 million on a per occurrence basis, except for claims transferred under the insured program as part of the loss portfolio transfer agreements.
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.
Future new 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. We may also need to invest significant additional resources in our people, processes, controls and information security.
Significant increases in the relative frequency or severity of workplace injuries due to failures to accurately assess potential risks or assure implementation of effective safety measures by our clients may result in increased workers’ compensation claims expenses, with a corresponding negative effect on our results of operations and financial condition. 10 Risks Related to Technology To succeed, we must constantly improve our technology to meet the expectations of our clients.
Significant increases in the relative frequency or severity of workplace injuries due to failures to accurately assess potential risks or assure implementation of effective safety measures by our clients may result in increased workers’ compensation claims expenses, with a corresponding negative effect on our 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.
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.
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.
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 8.4% in 2025 and 7.0% in 2024. There can be no assurance that we will continue to maintain current levels of revenues.
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.
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 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. 21 Risks Related to Ownership of our Common Stock Our stock price may be volatile or may decline, resulting in substantial losses for our stockholders.
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.
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. 17 Effective integration of AI into our platform may enhance our operational efficiency, expand our service capabilities and strengthen our competitive position by enabling us to deliver more value to clients, potentially creating new opportunities for growth.
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.
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 2025.
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.
Such regulations may result in operational costs to modify, maintain, or align our business practices with rapidly evolving, potentially unclear, or conflicting regulatory regimes, or constrain our ability to develop, deploy, or maintain these technologies. Other Risks Related to our Business and Industry New service offerings may subject us to additional risks.
Should the IRS or other tax authorities assess additional taxes as a result of these or other examinations, we may be required to record charges to operations that could have a material impact on our results of operations, financial position or cash flows.
Should the IRS or other tax authorities assess additional taxes as a result of these or other examinations, we may be required to record charges to operations that could have a material impact on our results of operations, financial position or cash flows. 18 Our long-term growth strategy may include acquisitions which could be unsuccessful or cause disruptions to our business, which could adversely impact our financial condition or results of operations.
If we fail to meet those expectations, we may lose clients and harm our business. To attract and retain clients and satisfy their expectations, the software, hardware and networking technologies we use must be frequently and rapidly upgraded, enhanced and improved in response to technological advances, competitive pressures, client expectations, and new and changing laws.
To attract and retain clients and satisfy their expectations, the software, hardware, networking technologies and artificial intelligence ("AI") tools we use must be frequently and rapidly upgraded, enhanced and improved in response to technological advances, competitive pressures, client expectations, and new and changing laws.
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.
However, 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.
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.
Economic downturns or shifts in labor market dynamics may impact workforce participation rates and overall labor availability. Additionally, changes in government administrations may result in shifts in immigration policies, which may affect our clients’ ability to recruit and retain workers.
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.
Certain jurisdictions in which we operate are considering or have proposed or enacted legislation and policies regulating AI and non-personal data, such as a recent Executive Order seeking to centralize AI policies and to identify and challenge inconsistent state laws.
Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our own employees, could result in the disclosure or misuse of confidential or proprietary information, which could have a material adverse effect on our business operations or that of our clients.
While our technology infrastructure is designed to safeguard and protect personal and business information, we have limited ability to monitor the implementation of similar safeguards by our vendors. 11 Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, corruption of data, misuse or theft of private or other sensitive information, or inadvertent acts by our own employees, could result in the disclosure or misuse of confidential or proprietary information, which could have a material adverse effect on our business operations or that of our clients.
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.
In addition, the use of AI by bad actors presents increasingly complex and sophisticated security threats to our data and the confidential data of our clients and employees. These potential security threats require additional efforts and investments to maintain network security and the security of the data we possess.
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.
In 2020 and 2021, the Company entered into loss portfolio transfer agreements to remove all outstanding workers’ compensation claims obligations for claims incurred under its insured program between February 1, 2014 and June 30, 2018.
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.
Any determination that we are not the administrative employer sponsoring single-employer plans 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.
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.
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. The thoughtful adoption of AI may create opportunities to enhance efficiency, improve client experiences and strengthen our competitive position.
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.
The market price of our Common Stock has been, and may continue to be, volatile for the foreseeable future.
Failure to comply with applicable data security and privacy regulations related to our health care offering could adversely affect our business. As BBSI began offering health benefits to our PEO clients in 2023, we have access to protected health information ("PHI") of our client employees.
Failure to comply with applicable data security and privacy regulations related to our health care offering could adversely affect our business. By offering health benefits to our PEO clients, we have access to protected health information ("PHI") of our client employees. Compliance with federal and state regulations such as HIPAA and the HITECH Act is required for handling this PHI.
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.
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.
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.
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. 16 Our business is subject to risks associated with healthcare reforms.
We are dependent upon technology services, and if we experience damage, service interruptions or failures in our computer and telecommunications systems, our client relationships and our ability to attract new clients may be adversely affected.
Any such charges, or the failure to realize the anticipated benefits of these investments, could have a material adverse effect on our operating results and financial condition. 10 We are dependent upon technology services, and if we experience damage, service interruptions or failures in our computer and telecommunications systems, our client relationships and our ability to attract new clients may be adversely affected.
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.
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.
As these threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information security and controls or to investigate and remediate any security vulnerabilities. While our technology infrastructure is designed to safeguard and protect personal and business information, we have limited ability to monitor the implementation of similar safeguards by our vendors.
As these threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information security and controls or to investigate and remediate any security vulnerabilities.
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.
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.
Failure to maintain health insurance coverage or significant increases in the cost of health insurance coverage could adversely affect our business and results of operations. In 2023, BBSI began offering health insurance benefits as part of our PEO services.
Failure to maintain health insurance coverage or significant increases in the cost of health insurance coverage could adversely affect our business and results of operations. We offer health insurance benefits as part of our PEO services. Our arrangement with third-party insurers provides health insurance coverage to BBSI’s PEO clients through December 31, 2026, with the possibility of additional annual renewals.
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.
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.
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.
Clients that 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. 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.
Failure to appropriately comply with data security regulations could materially adversely impact our business, reputation, operating results, and financial condition. We face competition from several other companies. We face competition from various companies that may provide all or some of the services we offer.
HIPAA imposes limitations on the use and disclosure of PHI, and sets requirements for health data privacy, security, and breach notification. Non-compliance with HIPAA can lead to penalties and fines. Failure to appropriately comply with data security regulations could materially adversely impact our business, reputation, operating results, and financial condition. We face competition from several other companies.
Our long-term growth strategy may include acquisitions which could be unsuccessful or cause disruptions to our business, which could adversely impact our financial condition or results of operations. Potential future acquisitions may introduce several risks related to the integration of businesses, personnel, product lines, and technologies.
Potential future acquisitions may introduce several risks related to the integration of businesses, personnel, product lines, and technologies.
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.
In addition, increased costs and supply chain disruptions resulting from these trade policies may strain our clients’ operations, which could result in client business slowdowns or closures, further affecting our ability to attract and retain clients.
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.
Clients affected by such trade restrictions may also experience liquidity constraints or broader financial difficulties, which could impair their ability to pay for our services. These factors could have a material adverse effect on our results of operations and financial condition.
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.
If our third-party insurers are unwilling or unable to renew an arrangement in the future, we would need to seek coverage from 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.
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.
While we disagree with the IRS’s position and our clients are contractually and statutorily responsible for repaying any rejected tax credits, this does not guarantee recovery, and any failure to recover rejected tax credits 19 from our clients where the IRS attempts to hold BBSI liable could have a material adverse effect on our business, reputation, results of operations, and financial condition.
Removed
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.
Added
Risks Related to Technology To succeed, we must constantly improve our technology to meet the expectations of our clients. If we fail to meet those expectations, we may lose clients and harm our business.
Removed
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.
Added
Furthermore, if we determine that a software project is no longer probable of being completed and placed in service, or if there is a significant change in the expected use of such technology, we may be required to recognize impairment charges or write-offs of previously capitalized development costs.
Removed
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
As with many innovations, AI presents risks and challenges that could disrupt our business model, such as risks related to implementation of AI technologies, including operational risks stemming from system failures or disruptions of business processes, as well as increased costs associated with acquiring, deploying, and maintaining AI technologies.
Removed
Compliance with federal and state regulations such as HIPAA and the HITECH Act is required for handling this PHI. HIPAA imposes limitations on the use and disclosure of PHI, and sets requirements for health data privacy, security, and breach notification. Non-compliance with HIPAA can lead to penalties and fines.
Added
AI has the potential to create new types of roles and generate new industries and service opportunities. To the extent that clients adopt AI in ways that expand or transform their workforce needs, we may benefit from new areas of demand for our services.
Removed
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.
Added
However, these emerging technologies—including automation tools, AI, and other advanced software—may reduce the need for businesses to hire employees or maintain the same number of positions. As AI capabilities expand, clients may increasingly automate tasks historically performed by employees, which could reduce the size of their workforces or slow the pace of new hiring.
Added
In some cases, AI tools may directly replace existing positions entirely. If these technologies reduce clients’ need for human capital, demand for our services may decline, adversely impacting our results of operations. 13 Changes in U.S. and foreign trade policies, including tariffs, related retaliatory measures, and other trade restrictions, could adversely affect our clients and our business.
Added
Developments in U.S. and foreign trade policies—including the imposition or escalation of tariffs, retaliatory measures by trading partners, and other trade restrictions such as export bans or suspensions on exporting critical raw materials—may materially impact our clients and in turn our business, particularly for those clients that rely on global supply chains.
Added
The U.S. executive branch has imposed or threatened tariffs to address trade imbalances, promote domestic manufacturing, and respond to national security concerns. In response, countries such as China have implemented or threatened retaliatory actions, including higher tariffs on U.S. goods and restrictions on the export of strategic resources such as rare earth elements and key industrial inputs.
Added
These measures can significantly raise the cost of raw materials, components, and finished goods, placing considerable financial pressure on our clients in certain industries that rely on imports, such as construction, manufacturing and logistics.
Added
To mitigate these impacts, clients may reduce payroll, delay hiring, or implement workforce reductions—all of which could lead to decreased demand for our services, adversely affecting our revenue.
Added
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. The spread of highly infectious diseases may reduce workforce participation due to illness, quarantine requirements, or caregiving responsibilities.
Added
Any of these factors could adversely impact our business and financial performance.
Added
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. 14 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
We face competition from various companies that may provide all or some of the services we offer.
Added
However, rapid advancements in AI may intensify competition. Competitors that adopt or develop AI‑enabled capabilities more successfully may be able to deliver services more efficiently, at lower cost, or with enhanced features, which could reduce the demand for our services or give such competitors a significant advantage.
Added
AI tools may also enable clients to automate or internally perform certain HR, payroll, benefits administration, compliance, or workforce‑management functions that we currently provide, which could reduce the need for our services altogether. If we are unable to adapt to these technological changes or incorporate AI effectively into our own offerings, our competitive position could be materially adversely affected.
Added
Climate impacts may adversely affect our business, financial condition, and results of operations. Concerns over the long-term effects of changes in climate have led to governmental efforts around the world to mitigate those impacts.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−0 removed15 unchanged
Biggest changeThird-Party Service Provider Risk Management We utilize third-party service providers for a variety of reasons, including, without limitation, infrastructure and SaaS cloud computing services, technology and business process service providers, content delivery to customers, back-office support, and other functions. Such providers may have access to information about BBSI or that we hold about our customers, associates or vendors.
Biggest changeThird-Party Service Provider Risk Management We utilize third-party service providers for a variety of reasons, including, without limitation, infrastructure and software as a service ("SaaS") cloud computing services, technology and business process service providers, content delivery to customers, back-office support, and other functions.
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.
The 23 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.
To mitigate the cybersecurity risk associated with the use of third-party service providers, we tier our third-party service providers based on their risk profile to establish applicable cybersecurity risk review standards and evaluate those providers in accordance with the tiering process.
Such providers may have access to information about BBSI or that we hold about our customers, associates or vendors. To mitigate the cybersecurity risk associated with the use of third-party service providers, we tier our third-party service providers based on their risk profile to establish applicable cybersecurity risk review standards and evaluate those providers in accordance with the tiering process.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
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.
Biggest changeNumber of Offices Branches California 18 Oregon 4 Washington 4 Utah 3 Arizona 2 Colorado 2 Idaho 2 Maryland 2 Nevada 2 Delaware 1 Illinois 1 North Carolina 1 Pennsylvania 1 Tennessee 1 Texas 1 On December 31, 2025, our leases had expiration dates ranging from less than one year to eight years.
We own our 65,300 square foot corporate headquarters building, which is located in Vancouver, Washington. 23 Item 3.
We own our 65,300 square foot corporate headquarters building, which is located in Vancouver, Washington. 24 Item 3.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
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
Biggest changeItem 4. Mine Safety Disclosures 25 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34 Item 8. Financial Statements and Supplementary Data 35

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) 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.
Biggest changeApproximate Dollar Value of Total Total Number of Shares that May Yet Number of Average Price Shares Repurchased Be Repurchased Shares Paid as Part of Publicly Under the Plan (1) Month Repurchased Per Share Announced Plan (1) (in thousands) Oct 1 - Oct 31, 2025 138,800 $ 43.16 138,800 $ 86,479 Nov 1 - Nov 30, 2025 258,800 35.51 258,800 77,289 Dec 1 - Dec 31, 2025 52,892 34.96 52,892 75,440 Total 450,492 450,492 (1) On August 4, 2025, the Board of Directors authorized the repurchase of up to $100.0 million of the Company’s common stock over a two-year period beginning August 4, 2025.
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 stock performance graph has been prepared assuming that $100 was invested on December 31, 2020 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, 2024.
The following table summarizes information related to stock repurchases during the quarter ended December 31, 2025.
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.
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 5, 2026, there were 21 stockholders of record and approximately 12,473 beneficial owners of the Common Stock.
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.
As of December 31, 2025, the Company had repurchased 610,062 shares at an aggregate purchase price of $24.6 million. 25 The following graph shows the cumulative total return at the dates indicated for the period from December 31, 2020 until December 31, 2025, 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. 12/19 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
The stock price performance reflected in the graph may not be indicative of future price performance. 12/20 12/21 12/22 12/23 12/24 12/25 Barrett Business Services, Inc. 100.00 102.90 141.05 177.40 268.62 225.69 NASDAQ Composite 100.00 122.18 82.43 119.22 154.48 187.14 S&P 1500 Human Resource & Employment Services Index 100.00 151.14 112.90 120.20 142.72 121.68 26

Item 7. Management's Discussion & Analysis

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

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Biggest changeSuch 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.
Biggest changeSuch factors with respect to the Company include: our ability to retain current clients and 29 attract new clients; technology disruption, including the displacement of employees through the adoption of AI and automation by our clients; difficulties associated with integrating clients into our operations; economic trends in our service areas and the potential effects of changing governmental policies, including those related to immigration, tariffs, other trade policies, or climate regulation; risks to our business and the business of our clients arising from current or future tariffs or other trade restrictions, supply chain issues, changes in labor force, or geopolitical instability, including the war in Ukraine, conflicts in the Middle East, and the potential for future conflicts or disruptions in other parts of the world; 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 monetary policy, 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.
Workers’ compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, third-party broker commissions, and risk manager payroll, as well as costs associated with operating our two wholly owned insurance companies, Associated Insurance Company for Excess (“AICE”) and Ecole Insurance Company (“Ecole”).
Workers’ compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, third-party broker commissions, risk manager payroll, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, as well as costs associated with operating our two wholly owned insurance companies, Associated Insurance Company for Excess (“AICE”) and Ecole Insurance Company (“Ecole”).
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.
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 and internally developed software costs.
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.
Property, equipment and internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years.
For staffing services other than direct placement, invoiced amounts include direct payroll, an amount intended to cover employer payroll-related taxes, workers’ compensation coverage, other service-related costs and a margin. Staffing customers are invoiced weekly and typically have payment terms of 30 days. Direct placement services are billed at agreed fees at the time of a successful placement.
For staffing services other than direct placement, invoiced amounts include direct payroll, an amount intended to cover employer payroll-related taxes, workers’ compensation coverage, other service-related costs and a margin. Staffing customers are typically invoiced weekly and generally have payment terms of 30 days. Direct placement services are billed at agreed fees at the time of a successful placement.
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.
Additional risk factors affecting our business are discussed in Item 1A 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.
Our PEO services are billed as a percentage of client payroll; the gross amount invoiced includes direct payroll costs plus an additional percentage amount to cover employer payroll-related taxes, workers’ compensation coverage (if provided), other service-related costs and a margin. However, actual costs can be higher or lower than anticipated.
Our PEO services are billed as a percentage of client payroll; the gross amount invoiced includes direct payroll costs and employee benefits coverage (if provided), plus an additional percentage amount to cover employer payroll-related taxes, workers’ compensation coverage (if provided), other service-related costs and a margin. However, actual costs can be higher or lower than anticipated.
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”).
Percentage of Gross Billings Year Ended December 31, 2025 2024 2023 PEO and staffing wages 86.9 % 87.0 % 87.0 % Payroll taxes and benefits 7.9 % 7.6 % 7.2 % Workers' compensation 2.3 % 2.4 % 2.7 % Gross margin 2.9 % 3.0 % 3.1 % We refer to employees of our PEO clients as worksite employees (“WSEs”).
Our estimates are based on actuarial analyses and informed judgment, derived from individual experiences and expertise applied to multiple sets of data and analyses. We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known.
Our estimates are based on actuarial analyses and informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses. We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known.
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.
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, 2025, 2024 and 2023, included in Item 8 of Part II of this report.
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.
Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. 27 Critical Accounting Estimate We have identified the following accounting estimate as critical to our business and the understanding of our results of operations.
Payroll taxes and benefits consist of the employer’s portion of Social Security and Medicare taxes, federal and state unemployment taxes, and employee benefit costs, which primarily comprises health insurance premiums paid to third-party insurers and underwriting and benefit consultant payroll.
Payroll taxes and benefits consist of the employer’s portion of Social Security and Medicare taxes, federal and state unemployment taxes, and employee benefit costs, which primarily comprise health insurance premiums paid to third-party insurers and underwriting and benefit consultant payroll.
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.
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, including the impact of AI and automation on workplace displacement; 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 inflationary pressures or 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.
We therefore present for purposes of analysis gross billings and wage information for the years ended December 31, 2024, 2023 and 2022.
We therefore present for purposes of analysis gross billings and wage information for the years ended December 31, 2025, 2024 and 2023.
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.
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 each of 2025, 2024 and 2023.
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.
Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025. 32 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 $197.1 million and $210.9 million at December 31, 2024 and December 31, 2023, 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 $175.3 million and $197.1 million at December 31, 2025 and December 31, 2024, respectively.
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.
The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to higher average payroll tax rates in 2025 and PEO client benefit costs of $75.6 million in 2025 compared to $33.4 million in 2024.
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 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 2025 totaled $54.4 million or 4.4% of revenue compared to $61.0 million or 5.3% of revenue for 2024.
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.
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 2025 as compared to 2024. Payroll taxes and benefits for 2025 totaled $720.8 million or 58.1% of revenue compared to $628.5 million or 54.9% of revenue for 2024.
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.
Year Ended December 31, (in thousands) 2025 2024 2023 Gross billings $ 9,042,132 $ 8,327,091 $ 7,716,152 PEO and staffing wages $ 7,856,320 $ 7,245,093 $ 6,711,115 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.
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.
The decrease in workers’ compensation expense as a percentage of revenue was primarily due to lower workers' compensation costs in the current year, which included favorable prior year liability and premium adjustments of $18.7 million in 2025, compared to favorable prior year liability and premium adjustments of $18.5 million in 2024.
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.
The increase in PEO services revenues was primarily attributable to a 6.7% increase in average number of WSEs as well as a 2.4% increase in average billing per WSE per day. Gross margin for 2025 totaled $260.9 million or 21.0% of revenue compared to $253.3 million or 22.2% of revenue for 2024.
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.
Net cash provided by investing activities totaled $30.8 million in 2025, compared to net cash provided by investing activities of $38.8 million for the comparable period of 2024.
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.
Net cash used in financing activities in 2025 was $53.0 million compared to net cash used in financing activities of $41.1 million for the comparable period of 2024. In 2025, net cash used in financing activities primarily consisted of repurchases of common stock of $42.0 million and dividend payments of $8.2 million.
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.
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.
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.
Year Ended December 31, 2025 Year-over-year % Growth 2024 Year-over-year % Growth 2023 Average WSEs 138,218 6.7 % 129,577 4.2 % 124,306 Ending WSEs 138,605 4.9 % 132,069 4.4 % 126,446 31 Years Ended December 31, 2025 and 2024 Net income for 2025 was $54.4 million compared to net income of $53.0 million for 2024.
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.
See “Note 5 - Revolving Credit Facility” 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. 33 Contractual Obligations The Company's contractual obligations as of December 31, 2025 are summarized below: As of December 31, 2025 Payments Due by Period (in thousands) Less than 1 - 3 4 - 5 After Total 1 Year Years Years 5 Years Operating leases (1) $ 27,516 $ 8,164 $ 12,135 $ 5,159 $ 2,058 Total contractual obligations $ 27,516 $ 8,164 $ 12,135 $ 5,159 $ 2,058 (1) As of December 31, 2025, the Company had no additional operating leases that have not yet commenced and remaining balances on short-term operating leases of $0.2 million, included in the table above.
Diluted net income per share for 2024 was $1.98 compared to diluted income per share of $1.85 for 2023.
Diluted net income per share for 2025 was $2.08 compared to diluted income per share of $1.98 for 2024.
Percentage of Total Net Revenues ($ 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.
Percentage of Total Net Revenues ($ in thousands) Years Ended December 31, 2025 2024 2023 Revenues: Professional employer services $ 1,168,334 94.2 % $ 1,063,386 92.9 % $ 982,268 91.9 % Staffing services 71,964 5.8 81,145 7.1 87,039 8.1 Total revenues 1,240,298 100.0 1,144,531 100.0 1,069,307 100.0 Cost of revenues: Direct payroll costs 54,443 4.4 61,010 5.3 65,042 6.1 Payroll taxes and benefits 720,798 58.1 628,534 54.9 555,758 52.0 Workers’ compensation 204,144 16.5 201,736 17.6 205,975 19.2 Total cost of revenues 979,385 79.0 891,280 77.8 826,775 77.3 Gross margin 260,913 21.0 253,251 22.2 242,532 22.7 Selling, general and administrative expenses 190,494 15.4 185,869 16.2 174,772 16.3 Depreciation and amortization 8,256 0.7 7,601 0.7 7,110 0.7 Income from operations 62,163 4.9 59,781 5.3 60,650 5.7 Other income, net 9,236 0.7 11,041 1.0 8,338 0.8 Income before income taxes 71,399 5.6 70,822 6.3 68,988 6.5 Provision for income taxes 16,951 1.4 17,829 1.6 18,376 1.7 Net income $ 54,448 4.2 % $ 52,993 4.7 % $ 50,612 4.8 % 30 We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees.
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.
In 2025, net cash provided by investing activities consisted primarily of proceeds from the sale and maturity of investments and restricted investments of $93.6 million, partially offset by the purchases of investments and restricted investments of $44.0 million and the purchase of property, equipment and software of $18.8 million.
Forward-Looking Information Statements in this Item or in Items 1, 1A, 3 and 9A of this report include forward-looking statements, which are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-Looking Information Statements in this Annual Report on Form 10-K include forward-looking statements, which are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
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%.
Revenue for 2025 totaled $1,240.3 million, an increase of $95.8 million or 8.4% over 2024, which reflects an increase in the Company’s PEO service revenue of $104.9 million or 9.9% and a decrease in staffing services revenue of $9.2 million or 11.3%.
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.
Liquidity and Capital Resources The Company's cash balance of $126.3 million at December 31, 2025, which includes cash, cash equivalents, and restricted cash, increased $43.7 million for the twelve months ended December 31, 2025, compared to the cash balance of $82.6 million at December 31, 2024, with an increase of $7.7 million compared to 2024.
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.
Workers’ compensation expense for 2025 totaled $204.1 million or 16.5% of revenue compared to $201.7 million or 17.6% of revenue for 2024.
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.
Selling, general and administrative (“SG&A”) expenses for 2025 totaled $190.5 million or 15.4% of revenue compared to $185.9 million or 16.2% of revenue for 2024. The increase of $4.6 million in SG&A expense was primarily attributable to increased employee-related costs. Other income, net for 2025 totaled $9.2 million compared to other income of $11.0 million for 2024.
A discussion of our financial condition and results of operations for 2023 compared to 2022 can be found in Part II, Item 7.
See “Note 8 - Income Taxes” to the consolidated financial statements included in Item 8 of Part II of this report for additional information regarding income taxes. A discussion of our financial condition and results of operations for 2024 compared to 2023 can be found in Part II, Item 7.
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.
In 2025, net cash provided by operating activities was primarily due to net income of $54.4 million, increased accrued payroll and related benefits of $22.6 million, increased payroll taxes payable of $12.8 million, share-based compensation of $10.4 million, increased other accrued liabilities of $8.8 million and depreciation and amortization of $8.3 million, partially offset by decreased workers’ compensation claims liabilities of $23.6 million, decreased premium payable of $16.0 million and increased trade accounts receivable of $14.1 million.
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.
Workers' Compensation Costs Under the Company’s workers’ compensation programs, we estimate ultimate losses, which represent the amount necessary to pay claims and related expenses associated with workplace injuries that have occurred under the programs.
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.
The increase in cash at December 31, 2025 as compared to December 31, 2024 was primarily due to the factors discussed below. Net cash provided by operating activities in 2025 amounted to $66.0 million, compared to net cash provided by operating activities of $10.1 million for the comparable period of 2024.
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.
To illustrate the sensitivity of changes in our estimate of workers’ compensation costs, a 5% increase in estimated ultimate losses for the 2025 accident year would result in a $0.6 million increase in workers’ compensation expense, and a 5% decrease in estimated ultimate losses for the 2025 accident year would result in a $7.5 million decrease to workers’ compensation expense.
Our income tax rate typically differs from the federal statutory tax rate of 21% primarily due to state taxes as well as federal and state tax credits. See “Note 8 - Income Taxes” to the consolidated financial statements included in Item 8 of Part II of this report for additional information regarding income taxes.
The decrease was primarily attributable to a decrease in investment income in 2025. Our effective income tax rate for 2025 was 23.7% compared to 25.2% for 2024. Our income tax rate typically differs from the federal statutory tax rate of 21% primarily due to state taxes as well as federal and state tax credits.
Removed
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.
Added
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. 28 For claims incurred under the Company's self-insured programs, we record reserves equal to our estimate of the ultimate losses up to the retention limit, reduced by claim payments made.
Removed
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.
Added
Third-party insurers assume substantially all risk of loss for claims incurred under the Company's fully insured arrangement. However, the Company's fully insured policies allow for return premiums if claims develop favorably, ranging from $20.0 million to $30.0 million depending on the policy period.
Removed
In January 2022, the Company paid off all of its long-term debt.
Added
For the policy period beginning July 1, 2021, BBSI can incur additional premiums up to $7.5 million if claims develop adversely. For all other policy years, no additional premiums can be charged based on claim performance.
Added
Our estimate of the losses associated with claims incurred under the fully insured policies directly impacts our estimate of the return premiums we may realize or the additional premiums that we may incur.
Added
The estimate we recorded for workers’ compensation costs was reduced by $18.7 million and $18.5 million in 2025 and 2024, respectively, due to changes in estimated losses for prior accident years. We believe that the amounts that we have recorded for our estimated workers’ compensation costs are reasonable.
Added
The Company has no long-term debt obligations as of December 31, 2025.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed2 unchanged
Biggest changeWe 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.
Biggest changeWe 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, 2025, a 50-basis-point increase in market interest rates would have a $3.2 million downward effect on the fair value of the Company's investment portfolio.
Outstanding 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
Outstanding 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, 2025, the Company had no outstanding borrowings on its line of credit. 34

Other BBSI 10-K year-over-year comparisons