Executive Summary

Q4 delivered solid top-line and controllable growth: Revenues $304.8M (+10% YoY), gross billings $2.25B (+10% YoY), and diluted EPS $0.63 (+17% YoY) as record new-client WSE adds and strong BBSI Benefits selling supported results .
Profitability was aided by favorable workers’ comp development ($2.4M) and lower claims costs; workers’ comp expense was 2.3% of gross billings (vs. 2.6% LY), while SG&A rose on higher incentive comp tied to better results .
2025 outlook introduced: gross billings +7% to +9%, average WSEs +4% to +6%, gross margin 2.85%–3.10% of billings, and tax rate 26%–27%—with commentary that stronger-than-expected January and health benefits momentum lifted management’s billings outlook by ~200 bps vs. views a quarter ago .
Capital returns remain active: $7M buyback in Q4, $37M returned in 2024, and a $0.08 quarterly dividend (confirmed; payable March 28, 2025) .
Potential stock catalysts: expanding BBSI Benefits (now ~575 clients/16k participants) and launch of a fully integrated Applicant Tracking System (ATS) ahead of further 2025 product rollouts and AI-enabled efficiencies .

What Went Well and What Went Wrong

What Went Well

Record WSE additions and strong retention drove 10% billings and revenue growth; CEO: “record WSE additions... continued high client retention... strong year-end selling season for BBSI Benefits” .
Health benefits momentum: doubled the targeted 1/1 book; “best January selling season we’ve ever had,” contributing to a higher 2025 billings outlook (+~200 bps vs prior internal view) .
Regional execution strong: East Coast +21% YoY, Southern California +11%, Mountain +10%, Northern California +5% in Q4, indicating broad-based growth beyond PNW softness .

What Went Wrong

Staffing revenues declined 9% YoY in Q4; management expects modest growth in 2025 as mix shifts to higher-value recruiting for PEO clients .
Workers’ comp market pricing remains soft (rate declines persist, albeit decelerating), requiring offsets from internal program savings; bottom not yet evident .
Payroll tax rate increases will again create some lag in repricing in 2025, potentially shaping quarterly earnings cadence (more Q1 pressure) though not expected to damage rolling 12-month margins .

Financial Results

Summary P&L (USD)

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($M)	$279.651	$294.278	$304.820
Gross Billings ($M)	$2,029.036	$2,138.510	$2,251.997
Gross Margin ($M)	$67.897	$74.412	$71.375
Income from Operations ($M)	$20.408	$23.453	$20.619
Net Income ($M)	$16.701	$19.628	$16.800
Diluted EPS	$0.62	$0.74	$0.63

Notes:

Q4 YoY: Revenue +10% , Gross Billings +10% , Net Income +15% , Diluted EPS +17% (to $0.63 from $0.54) .
Q4 vs Q3 (QoQ calc): Revenue +3.6% (from $294.278M to $304.820M) ; EPS -14.9% (from $0.74 to $0.63) .

Segment Revenues (USD)

Segment	Q2 2024	Q3 2024	Q4 2024
Professional Employer Services	$259.887M	$272.793M	$284.517M
Staffing Services	$19.764M	$21.485M	$20.303M

Margin Ratios (as % of Gross Billings)

Ratio	Q2 2024	Q3 2024	Q4 2024
Payroll Taxes & Benefits	7.3%	7.2%	7.3%
Workers’ Compensation	2.5%	2.3%	2.3%
Gross Margin	3.3%	3.5%	3.2%

KPIs and Program Items

KPI	Q2 2024	Q3 2024	Q4 2024
Average WSEs	128,734	133,398	133,124
Ending WSEs	130,046	132,698	132,069
Avg Billing per WSE YoY	+3%	+3%	+3.3%
Workers’ Comp Favorable Adj.	$8.9M	$4.3M	$2.4M

Estimates vs. Actuals (Q4 2024)

Metric	Actual	Consensus
Revenue	$304.820M	N/A – S&P Global consensus unavailable at time of request
Diluted EPS	$0.63	N/A – S&P Global consensus unavailable at time of request

Note: S&P Global consensus data could not be retrieved at the time of analysis due to an API limit, so beat/miss vs. estimates cannot be determined.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Billings Growth	FY 2025	N/A (initial)	+7% to +9%	New
Avg WSE Growth	FY 2025	N/A (initial)	+4% to +6%	New
Gross Margin (% of Billings)	FY 2025	N/A (initial)	2.85% to 3.10%	New
Effective Tax Rate	FY 2025	N/A (initial)	26% to 27%	New
Quarterly Dividend	Next Payable	$0.08 (prior)	$0.08 on Mar 28, 2025	Maintained

Management commentary indicates the 2025 gross billings outlook was raised by ~200 bps vs. what they would have expected a quarter ago, driven by strength in benefits and January selling .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2024)	Current Period (Q4 2024)	Trend
BBSI Benefits (healthcare)	Q2: Launched Kaiser HMO; 380 clients/8.5k participants; accretive path . Q3: 480 clients/11k; pipeline +35% .	Q4: ~575 clients/16k participants; best January; revenue model via reseller fees + admin fee expansion	Accelerating adoption and profitability
Tech/AI & myBBSI	Q2: Ongoing myBBSI investments . Q3: More products coming in ’25 .	Q4: Launched ATS; more AI/system launches planned in 2025	Product roadmap execution improving
Regional Trends	Q2: East +19%, PNW -3% . Q3: East +18%, PNW -1% .	Q4: East +21%, SoCal +11%, Mountain +10%, NorCal +5%, PNW -4%	Broad-based strength; PNW lagging but stabilizing
Workers’ Comp Market	Q2: Favorable adj. $8.9M; fully-insured program renewed on favorable terms . Q3: Favorable adj. $4.3M .	Q4: Favorable adj. $2.4M; pricing declines continue but decelerating	Savings offset pricing pressure; decelerating declines
Payroll Taxes	Q2: Higher rates contemplated in pricing; margin cadence late-year benefit .	Q4: 2025 rates up again; repricing lag may shape quarterly EPS (Q1 more pressured)	Manageable headwind; pricing catch-up
Staffing	Q2: -3% YoY; expected sequential growth in 2H . Q3: -2% YoY; stabilizing .	Q4: -9% YoY; modest growth forecast in 2025	Stabilizing, then gradual recovery expected
Client Hiring/Macro	Q2: Improved, broad-based . Q3: Stable but below historical .	Q4: Modest improvement continues; overtime up; cautious optimism	Gradual improvement

Management Commentary

“We finished 2024 on a strong note... record WSE additions from new clients, continued high client retention, and a strong year-end selling season for our BBSI Benefits healthcare offering.” – Gary Kramer, CEO .
“Best January selling season we’ve ever had... moved up our gross billings estimate by ~200 basis points from what we originally thought a quarter ago.” – Anthony Harris, CFO .
“We are also making investments in systems and AI that will launch in 2025 to better support our employees and create efficiencies.” – Gary Kramer, CEO .
“Our workers’ compensation program continues to perform well... favorable adjustments for prior year claims.” – Anthony Harris, CFO .

Q&A Highlights

Hiring and wage inflation: management sees stability and modest improvement; overtime ticked up in Q4; wage inflation remains a baseline driver .
Healthcare monetization: income comes from reseller fees plus higher PEO admin fee; no underwriting risk assumed; disclosures may expand as scale grows .
Payroll tax rates: increases in 2025 broadly in line with expectations; repricing lag could shift quarterly earnings shape (more Q1 loss), but no expected margin degradation over rolling 12 months .
Workers’ comp pricing: declines persist but are decelerating; bottom not yet seen; BBSI expects continued offsets from program savings .
Regional risks (CA wildfires): minimal direct client impact; potential medium-term reconstruction tailwind for blue/gray-collar clients .

Estimates Context

S&P Global consensus estimates (revenue/EPS) were unavailable at time of request due to an API limit, so we cannot assess beat/miss for Q4 2024. Actuals: Revenue $304.820M; Diluted EPS $0.63 .
Given stronger January and benefits momentum, Street models may need higher 2025 gross billings and modestly higher revenue assumptions, while factoring lower 2025 investment income and payroll tax timing effects .

Key Takeaways for Investors

Controllable growth is robust (record WSE adds, high retention), with health benefits a growing profit center; expect earnings leverage as benefits scale without significant incremental SG&A .
2025 guide implies healthy top-line (+7–9% billings) and stable margin framework (2.85%–3.10% of billings), underpinned by benefits expansion and improving hiring .
Near-term cadence watch items: payroll tax repricing lag (Q1 heavier), lower investment income on falling short rates, and continued workers’ comp pricing softness offset by internal savings .
Regional mix improving (East/SoCal strong; PNW stabilizing), supporting breadth in growth drivers into 2025 .
Product roadmap is an incremental catalyst (ATS launched; more AI/system rollouts coming), strengthening differentiation and potentially aiding sales velocity and retention .
Capital returns remain a support (active buyback, $0.08 dividend), backed by debt-free balance sheet and $122M unrestricted cash/investments at year-end .
For positioning, emphasize exposure to SMB hiring recovery, benefits scale-up, and internal efficiency gains; monitor staffing trajectory for confirmation of 2025 inflection .

All figures and statements are sourced from the company’s Q4 2024 8-K and Exhibit 99.1 press release, Q4 2024 earnings call, related Q2/Q3 2024 materials, and contemporaneous press releases: .

BARRETT BUSINESS SERVICES INC (BBSI)·Q4 2024 Earnings Summary