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1. Company Snapshot

1.a. Company Description

Barrett Business Services, Inc.provides business management solutions for small and mid-sized companies in the United States.The company develops a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry.


It offers professional employer services under which it enters into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers' compensation coverage, and other administration functions for the client's existing workforce.The company also provides staffing and recruiting services, such as on-demand or short-term staffing assignment, contract staffing, direct placement, and long-term or indefinite-term on-site management services.It serves electronics manufacturers, light-manufacturing industries, agriculture-based companies, transportation and shipping enterprises, food processors, telecommunications companies, public utilities, general contractors in various construction-related fields, and professional services firms.


The company was incorporated in 1965 and is headquartered in Vancouver, Washington.

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1.b. Last Insights on BBSI

Barrett Business Services' recent performance was negatively impacted by its Q3 earnings miss, with quarterly earnings of $0.79 per share, falling short of the Zacks Consensus Estimate of $0.81 per share. The company's revenue also disappointed, with investors having expected $319.2730 million. Management's commentary during the earnings call may provide insight into the challenges faced, but no specific details on future outlook or guidance were provided. This earnings miss likely raised concerns about the company's growth trajectory.

1.c. Company Highlights

2. BBSI's Q3 Earnings: A Strong Performance Amidst Macro Uncertainty

The company reported a robust financial performance in Q3, with gross billings increasing 8.6% to $2.32 billion, driven by a record number of worksite employees added from new clients. The PEO gross billings rose 8.8% to $2.3 billion, while staffing revenues declined 10% to $19 million. The actual EPS came in at $0.79, slightly below estimates of $0.81. The company's workers' compensation program continues to perform well, with favorable claim frequency trends and development. As Anthony Harris noted, "Our workers' compensation program continues to perform well, with favorable claim frequency trends and favorable claim development."

Publication Date: Nov -23

📋 Highlights
  • Record Worksite Employee Growth:: Added 10,400 worksite employees from new clients, driving 8.6% gross billings growth to $2.32B in Q3.
  • High Client Retention & Satisfaction:: Net Promoter Score remained in the high 60s for three consecutive years, reflecting strong client loyalty.
  • Staffing Business Decline:: Staffing revenue fell 10.3% YoY, attributed to macroeconomic uncertainty and client hesitation to place orders.
  • BBSI Benefits Expansion:: Gained 1,300 new participants in Q3, with October benefits submissions up 60% YoY, signaling seasonal sales momentum.
  • Workers’ Comp Rate Increases:: California approved an 8.7% average premium rate hike, aligning with rising pricing trends from carriers and competitors.

Revenue Growth and Margins

The company's revenue growth was fueled by new client sales, expanded adoption of new products, and excellent client retention. The PEO worksite employees grew by 6.1% in the quarter, driven by a record number of WSEs added from new clients. The staffing business declined by 10.3% over the prior year quarter, within expectations, due to macroeconomic uncertainty. Analysts estimate next year's revenue growth at 7.8%.

Valuation and Returns

With a P/E Ratio of 16.33 and an EV/EBITDA of 10.74, the company's valuation appears reasonable. The ROE of 21.65% and ROIC of 12.66% indicate strong returns on equity and invested capital. The Dividend Yield is 0.92%, and the Free Cash Flow Yield is 2.98%. These metrics suggest that the company's financial performance is on track, and its valuation is justified.

Growth Prospects

Gary Kramer discussed the company's growth prospects, citing controllable factors such as bringing on new business and retaining existing clients, as well as wage inflation. The company expects to continue growing at a rate driven by controllable factors, with a possible 2% increase in WSE growth. The new client pipeline is healthy, with a significant increase in prospects compared to last year. The top of the funnel is well-stocked, and the company has a good process for converting prospects into clients.

Product Launches and Innovation

The company is investing in AI-enabled technology and expects to launch several products in the coming months, including a comprehensive HR information system. The average size of new clients is increasing, with an average of 2 more worksite employees compared to last year. The company is seeing a higher average size of new clients across all services, not just health insurance.

3. NewsRoom

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Boston Partners Lowers Position in Barrett Business Services, Inc. $BBSI

Dec -01

Source: defenseworld.net

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Geode Capital Management LLC Sells 3,611 Shares of Barrett Business Services, Inc. $BBSI

Nov -29

Source: defenseworld.net

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Private Capital's Strategic Moves: Spotlight on Matthews International Corp

Nov -14

Source: gurufocus.com

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Barrett Business Services, Inc. (BBSI) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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Compared to Estimates, Barrett (BBSI) Q3 Earnings: A Look at Key Metrics

Nov -06

Source: zacks.com

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Barrett Business Services (BBSI) Misses Q3 Earnings and Revenue Estimates

Nov -05

Source: zacks.com

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Barrett Business Services (BBSI) Expected to Announce Quarterly Earnings on Wednesday

Nov -04

Source: defenseworld.net

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BBSI Sets Third Quarter 2025 Conference Call for Wednesday, November 5, 2025, at 5:00 p.m. ET

Oct -22

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.84%)

6. Segments

Professional Employer Services

Expected Growth: 8%

Barrett Business Services, Inc.'s Professional Employer Services segment growth is driven by increasing demand for HR outsourcing, rising need for compliance expertise, and expansion into new markets. Additionally, the company's strategic acquisitions, investments in technology, and strong client retention rates contribute to its 8% growth.

Staffing Services

Expected Growth: 6%

Barrett Business Services' Staffing Services segment growth is driven by increasing demand for temporary and contract labor, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on providing value-added services, such as payroll processing and human resource management, contributes to its growth. Furthermore, the rising trend of outsourcing non-core functions by businesses also supports the segment's growth.

7. Detailed Products

Professional Employer Organization (PEO) Services

Provides comprehensive HR outsourcing solutions, including payroll processing, benefits administration, and compliance management.

Staffing and Recruiting Services

Offers temporary, temporary-to-permanent, and direct hire staffing solutions, as well as recruitment process outsourcing (RPO) services.

Workers' Compensation Insurance

Provides workers' compensation insurance coverage to protect businesses from work-related injuries and illnesses.

Payroll Processing Services

Offers payroll processing, tax compliance, and benefits administration services.

Human Resource Consulting Services

Provides HR consulting services, including HR audits, compliance, and best practices implementation.

8. Barrett Business Services, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Barrett Business Services, Inc. is medium due to the presence of alternative staffing and HR outsourcing providers.

Bargaining Power Of Customers

The bargaining power of customers is low due to the company's strong brand reputation and the lack of significant buyer concentration.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers and the company's moderate dependence on them.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including regulatory requirements and the need for significant capital investment.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the staffing and HR outsourcing industry, leading to intense competition.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 9.63%
Debt Cost 3.95%
Equity Weight 90.37%
Equity Cost 10.76%
WACC 10.11%
Leverage 10.65%

11. Quality Control: Barrett Business Services, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Barrett Business Services

A-Score: 6.0/10

Value: 5.9

Growth: 5.6

Quality: 6.0

Yield: 2.0

Momentum: 7.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Heidrick & Struggles

A-Score: 5.2/10

Value: 4.9

Growth: 4.1

Quality: 5.6

Yield: 3.0

Momentum: 8.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
Kforce

A-Score: 5.1/10

Value: 7.0

Growth: 4.4

Quality: 6.5

Yield: 7.0

Momentum: 0.0

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Kelly Services

A-Score: 4.3/10

Value: 8.6

Growth: 2.0

Quality: 4.2

Yield: 4.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
HireRight

A-Score: 4.1/10

Value: 6.4

Growth: 7.1

Quality: 3.4

Yield: 0.0

Momentum: 5.0

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
BGSF

A-Score: 4.0/10

Value: 8.1

Growth: 3.3

Quality: 3.0

Yield: 8.0

Momentum: 0.5

Volatility: 1.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

34.53$

Current Price

34.53$

Potential

-0.00%

Expected Cash-Flows