Barrett's Profit Falls as Gross Margin Compresses

The Tip Desk · November 11, 2026 · 3 min read

Third-quarter net income was $16.8 million, or $0.69 a share, as gross margin reached 3.0% of gross billings.

Barrett Business Services, Inc. (BBSI), a provider of business management solutions, reported third-quarter net income of $16.8 million, or $0.69 a share, down from $20.6 million, or $0.79 a share, a year earlier.

Revenue rose 5% to $334.1 million from $318.9 million in the third quarter of 2025, after 4% growth in the second quarter. Gross billings increased 3% to $2.40 billion, matching the prior quarter’s 3% increase.

The company said the billings increase was driven by growth in professional employer services, primarily from increased worksite employees from net new clients, as well as higher average billings per WSE per day. Average WSEs rose 0.6% to 142,319, after 0.5% growth in the second quarter. Ending WSEs were 142,020, up 1.1%.

Gross margin compressed to 3.0% of gross billings from 3.3% a year earlier. Workers’ compensation expense was 2.4% of gross billings, including $0.8 million of favorable prior-year liability and premium adjustments, versus 2.2% a year earlier with $3.9 million of such adjustments. Benefit costs rose to 1.3% of gross billings from 0.9% a year earlier. PEO and staffing wages were 86.6% of gross billings.

PEO services revenue was $316.2 million versus $299.7 million a year earlier. Staffing services revenue was $17.9 million versus $19.3 million. Income from operations was $21.2 million versus $24.8 million.

President and CEO Gary Kramer said results were in line with expectations, reflecting continued execution against controllable growth initiatives and disciplined operational management. He said client hiring trends remain soft, and that the company is encouraged by improving conditions in the workers’ compensation market and its continued ability to secure rate increases.

Unrestricted cash and investments were $73.7 million as of September 30, 2026, compared with $67.9 million as of June 30, 2026. BBSI remained debt free at quarter end.

Under the stock repurchase program established in August 2025, BBSI repurchased $9.0 million of common stock in the third quarter, comprising 273,695 shares at an average price of $33.01. About $31.2 million remained available under the $100 million program. The company paid $1.9 million of dividends and confirmed its next regular quarterly cash dividend at $0.08 a share, payable December 4, 2026, to stockholders of record as of November 20, 2026. Year-to-date capital returned through repurchases and dividends totaled more than $50 million.

The calendar-year 2026 outlook is gross billings growth of 3% to 4%, growth in the average number of WSEs of 1% to 2%, gross margin as a percent of gross billings of 2.70% to 2.75%, and an effective annual tax rate of 26% to 27% excluding the one-time charge related to prior-year tax credits.

In the first quarter of 2026, the company recorded tax-effected charges of $11.6 million related to the disallowance of certain wage-based tax credits claimed in prior years, which it excluded from non-GAAP measures.