• Gross Billings: Increased 10% to $2.25 billion in Q4 2024, compared to $2.05 billion in Q4 2023.
• Diluted Earnings Per Share (EPS): Increased 17% to $0.63 in Q4 2024, compared to $0.54 in Q4 2023.
• Full Year Gross Billings: Grew 7.9% to $8.3 billion in 2024, compared to $7.7 billion in 2023.
• Full Year Diluted EPS: Increased 7% to $1.98 in 2024, compared to $1.85 in 2023.
• PEO Worksite Employees: Grew by 5.2% in Q4 2024.
• Staffing Revenue: Declined 9% to $20 million in Q4 2024.
• SG&A Expense: Increased 7% year-over-year in Q4 2024.
• Investment Income: $2.5 million in Q4 2024, down $300,000 from the prior year.
• Unrestricted Cash and Investments: $122 million as of December 31, 2024.
• Share Repurchase: $7 million repurchased in Q4 2024 at an average price of $43 per share.
• Total Capital Return to Shareholders: $37 million in 2024, including dividends and share repurchases.
• 2025 Gross Billings Growth Expectation: Expected to increase between 7% and 9%.
• 2025 Average WSEs Growth Expectation: Expected to increase between 4% and 6%.
• 2025 Gross Margin Expectation: Expected to range between 2.85% and 3.10%.
• Effective Annual Tax Rate for 2025: Expected to be between 26% and 27%.

• Warning! GuruFocus has detected 4 Warning Signs with SNOW.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Barrett Business Services Inc (NASDAQ:BBSI) reported a strong fourth quarter, exceeding financial expectations and achieving record client retention rates.
• The company successfully expanded into new geographies with an asset-light model, adding over 500 new worksite employees in January alone.
• BBSI's strategic sales initiatives have resulted in a record number of worksite employee additions from new clients, particularly in white-collar verticals.
• The company's Net Promoter Score increased by 5 points to 69, indicating high client satisfaction and confidence in BBSI's services.
• BBSI's new health insurance offering, BBSI Benefits, exceeded expectations by doubling the number of clients and participants, becoming a profit center for the company.

Negative Points

• The staffing business declined by 9% in the fourth quarter and 7% for the year, although the rate of decline has slowed.
• Client growth remained below historical averages, with only modest increases in client workforce during the fourth quarter.
• The Pacific Northwest region experienced a 4% decline in gross billings, although trends have begun to stabilize.
• Investment income decreased by approximately $300,000 due to lower average interest rates, with expectations of continued lower investment income in 2025.
• Workers' compensation pricing continues to face softness, although cost savings have offset some pricing pressure.

Q & A Highlights

Q: What are you hearing from clients regarding their ability to continue growing in the current environment, especially with higher wages? A: Anthony Harris, CFO, mentioned that they are seeing stability and recovery in metrics like wage inflation, which remains consistent and is a baseline driver of growth. Hiring trends have improved, particularly in Q3 and Q4, with increased overtime hours indicating more client activity. They are cautiously optimistic about modest improvements in hiring trends.

Q: Is the majority of worksite employee (WSE) growth coming from new clients? A: Gary Kramer, CEO, confirmed that the lion's share of growth is from controllable growth, which includes clients they already have and the WSEs they retain.

Q: Can you explain how BBSI gets paid on healthcare, and how do you see this evolving? A: Gary Kramer explained that BBSI does not take health insurance risk. They earn a commission from the market for selling the product and charge a higher PEO admin fee due to the value they provide in administration, compliance, and IT. This has led to strong financial results and they plan to continue expanding this area.

Q: Are there any plans to break out healthcare revenue in financial disclosures? A: Anthony Harris stated that they are considering how to disclose the right metrics for understanding the business. The income from healthcare is twofold, involving both reseller fees and admin fee expansion. They are being thoughtful about how to present this information and plan to expand disclosures.

Q: Have technology initiatives been enhanced due to attracting non-traditional clients in the white-collar space? A: Gary Kramer noted that they have been investing in their IT tech stack for the last three years to support business growth. They are using software to support their business, with the recent launch of an applicant tracking system. This is part of a broader strategy to enhance the employee life cycle experience.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.