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Wednesday, Nov. 5, 2025 at 5 p.m. ET CALL PARTICIPANTS President and Chief Executive Officer — Gary Edward KramerExecutive Vice President, Chief Financial Officer, and Treasurer — Anthony J. Harris Need a quote from a Motley Fool analyst? Email [email protected] Staffing revenues declined 10% to $19 million, in line with management expectations, reflecting persistent client reluctance to place staffing orders.Gross margin as a percentage of gross billings is expected to be modestly lower than the prior year due to ongoing workers’ compensation pricing pressure and reduced staffing volume.Year-over-year decreases in average hours worked and Modest net negative client hiring partially offset record new worksite employee additions. Gross Billings -- Gross billings were $2.32 billion, up 8.6% year-over-year, with PEO gross billings increased 8.8% to $2.3 billion and Staffing revenues declined 10% to $19 million (incomplete subtotal as gross billings include other streams).PEO Worksite Employees -- Grew 6.1%, setting a record, Driven by a record 10,400 worksite employees added year over year from net new clients, but partially offset by lower client hiring.Net Income per Diluted Share -- Net income per diluted share was $0.79, representing 7% growth compared to $0.74 in the prior-year quarter.Gross Margin Guidance -- Management projects a year-end gross margin as a percentage of gross billings between 2.9% and 3.0%, with the range tightened to reflect pricing and volume impacts.SG&A Expense -- Increased approximately 2%, driven primarily by employee-related costs, while Benefiting from ongoing operating leverage as costs rose more slowly than billings and margin.Investment Income -- Earned $1.9 million in investment income, Down about $300,000 compared to the prior year because of lower average interest rates.Regional PEO Billings Growth -- Southern California grew by 9% year-over-year, Northern California grew by 3% year-over-year, Mountain increased 13% year-over-year, East Coast grew by 14% year-over-year, Pacific Northwest declined by 3% year-over-year, and Asset-light markets grew by 132% year-over-year.Dividend and Stock Repurchases -- Returned $10 million to shareholders through $8 million of share repurchases at an average price of $47 and $2.1 million in dividends; $31 million returned to shareholders year to date.Client Health Benefits -- Added about 1,300 participants to benefits products, Reaching a total of over 20,000 participants across approximately 750 client firms as of October 2025.Client Pipeline Activity -- Health insurance quote submissions for October increased 60% year-over-year, with management attributing this to both market conditions and stronger referral partner relationships.Workers’ Compensation Rate Increases -- The California insurance commissioner recently approved an average 8.7% increase in workers’ compensation premium rates, and comparable filings were reported by several major carriers.Asset-Light Expansion -- The company reports having 22 new market development managers and About 1,400 worksite employees added from new asset-light markets.Technology Investments -- Multiple new product launches are scheduled over the next six months, including enhancements to the employee lifecycle and integrations for larger and white-collar clients.Effective Tax Rate Guidance -- Year-end effective annual tax rate is projected between 26% and 27%.Full-Year Gross Billings Growth Outlook -- Management projects an 8.5%-9.5% increase in gross billings, with Controllable growth and worksite employee growth forecast at 6%-8%. The company’s quarter featured record levels of worksite employees and client additions, despite being tempered by lower-than-expected client hiring and staffing revenues. Management indicated that controllable growth initiatives—including new products and geographic expansion—are yielding measurable results, as evidenced by regional billings surges and improved client metrics. Workers’ compensation and health benefits rate increases, along with a robust quoting environment, are driving expanded opportunities but introduce margin and market variability. Technology upgrades and product launches are targeted to attract larger and more sophisticated clients, aligning with management’s strategy to broaden the client base and support retention. Chief Executive Officer Kramer highlighted that the net promoter score remained “in the high sixties for a third straight year,” according to Gary Edward Kramer, supporting client satisfaction claims.Gary Edward Kramer said, “We have more products to sell, more people selling them, and more referral partners recommending Barrett Business Services, Inc.”Average billing per worksite employee per day increased 2.5%, attributed to continuing wage growth.Staffing placements for PEO clients rose to 116 applicants, exceeding last year’s figure by 11.Workers’ compensation and health benefits businesses are 100% fully insured, with management emphasizing the company’s strategy to mitigate insurance risk exposure.In Northern California, the company experienced notable client workforce reductions, particularly in the construction and transportation/logistics industries, with Construction declines described by management as “transitory.”For clients brought on this year, the average size of new client accounts was about two worksite employees greater than last year.Management’s confirmed absence of debt and maintenance of $110 million in cash and investments as of September 30 reinforce the company’s financial stability. INDUSTRY GLOSSARY PEO (Professional Employer Organization): A firm that provides comprehensive HR outsourcing services, including payroll, benefits, regulatory compliance, and workers’ compensation, through a co-employment model.WSE (Worksite Employee): An employee of a client company who is contracted under the PEO relationship and is included in the co-employment workforce count.Asset-Light Model: A business expansion approach focused on minimal physical infrastructure or capital expenditure, relying instead on scalable platforms and field staff.Gross Billings: Total client billings before direct costs, reflecting gross labor and service charges invoiced to clients.SG&A (Selling, General & Administrative) Expense: Ongoing operational costs necessary to support sales, administration, and general company functions. Full Conference Call Transcript Gary Edward Kramer: Delivering a record number of worksite employees. Solid revenue growth was fueled by new client sales, expanded adoption of new products, and excellent client retention. Moving to our financial results and worksite employees, during the quarter, our gross billings increased 8.6% over the prior year's quarter. We continue to execute various strategies to increase the top of the sales funnel, and we achieved a record number of worksite employees from new client ads. Client satisfaction continues to drive favorable retention rates. Every year, we conduct a survey of our clients to evaluate customer needs and satisfaction. And I am pleased to report that our net promoter score remains in the high sixties for a third straight year. This gives us great confidence in the value our clients place on the service and solutions we provide. Our clients love what we do, and they are ready and willing to spread the word about Barrett Business Services, Inc. The result of all these efforts, what I refer to as controllable growth, is that we added a record 10,400 worksite employees year over year from net new clients. However, client hiring was lower than we forecasted. We experienced a slowdown in California across most industries, fueled by macro uncertainty, including tariff policy and interest rates. So our record controllable growth was slightly offset by a decline in our client's workforce and resulted in a total growth of worksite employees by 6.1%. To our staffing operations, our staffing business declined by 10.3% over the prior year quarter and was within our expectations. We continue to see reluctance from our clients to place staffing orders amid the macroeconomic uncertainty. We continue to execute our strategy to recruit for our PEO clients and placed 116 applicants in the quarter, which is 11 more than the prior year quarter. Moving to the field operational updates, we are very pleased with our entrance into new markets. With our asset-light model, we have 22 total new market development managers in various stages of their development. These folks have been gaining traction and consistency and have added approximately 1,400 new worksite employees through Q3. In September, we had grand openings for our new Chicago and Dallas branches. In each of these locations, we have formed business teams with local folks to support our clients and have moved into traditional brick-and-mortar Barrett Business Services, Inc. branches. We are also planning another grand opening for Nashville in January. We continue to see positive results from our investments in new markets and are actively recruiting additional new market development managers. Regarding product updates, we continue to execute on the sale and service of Barrett Business Services, Inc. benefits, our health insurance offering. Our strong momentum continued into the third quarter. We added approximately 1,300 participants to our various benefits products in Q3. I am pleased to report that through October, we have approximately 750 clients on our various plans with over 20,000 total participants. We are gaining traction and continue to improve the sales and service of Barrett Business Services, Inc. benefits. Our value proposition resonates well, and we are having success with small and large clients in white and blue-collar industries in every state we operate with a diverse distribution channel. Our teams are now in the mix of the heavy selling and benefits renewal season. As many of you are aware, health insurance rates are increasing, which is causing consumers to shop around. Our October submissions for one-one transactions are 60% greater than October of the prior year. Anthony J. Harris: I attribute this to the market forces plus the trust we have earned from our referral partner network. We anticipated an increase in activity, and we have staffed up accordingly. It is still too early to comment on one-one, but we are optimistic that we can repeat or exceed our successful selling campaign from the prior year. Next, I'd like to shift to our 2025 IT product objective. I've previously mentioned that we've been investing in our tech stack on the product side to better service and support our clients. Over the last couple of years, we've made additional investments in MyDBSI to support our Barrett Business Services, Inc. benefits offering, adding a learning management system, added an applicant tracking system, as well as numerous integrations with third-party systems. We continue to execute our product roadmap to round out the employee life cycle experience. We think of this life cycle from a client's perspective, from when an employee is hired to when the employee retires and everywhere in between. We will be replacing or bolstering attributes of the life cycle with additional product launches over the next six months. Our client-centric focus is on delivering more technology and more products, all supported by the best local talent. We believe these enhancements will make it easier to sell to new customers and retain existing businesses. Additionally, we believe this offering will strongly resonate with white-collar businesses and larger employers. Next, I'd like to shift to our view of the remainder of the year. We've had consecutive quarters of great momentum. We are consistently growing our WSE stack. We ended Q3 with a record number of worksite employees, and we continue to be optimistic about the road ahead. We have consistently achieved strong controllable growth by focusing on the needs of our clients and by adding new clients. We have more products to sell, more people selling them, and more referral partners recommending Barrett Business Services, Inc. Now I'm going to turn the call over to Anthony for his prepared remarks. Gary, and hello, everyone. I'm pleased to report we finished the quarter with strong results. Gross billings increased 8.6% to $2.32 billion in Q3 2025, versus $2.14 billion in Q3 2024. PEO gross billings increased 8.8% in the quarter to $2.3 billion, while staffing revenues declined 10% to $19 million. Anthony J. Harris: Our PEO worksite employees grew by 6.1% in the quarter, which, as Gary noted, was driven by a record number of WSEs added from new clients. This was coupled with ongoing favorable client retention, continuing a strong trend of controllable growth. This was partially offset by modest net negative client hiring year over year compared with our original expectation of flat hiring in the quarter. Average billing per WSE per day increased 2.5% in the quarter, which was driven by continued increasing wages. Looking at year-over-year PEO gross billings growth by region for Q3, Southern California grew by 9%, Northern California grew by 3%, Mountain grew by 13%, East Coast grew by 14%, the Pacific Northwest declined by 3%, and our asset-light markets grew by 132%. Southern California represents our largest region and has maintained strong growth driven primarily by strong client adds and favorable client retention. Northern California was the region most negatively impacted by client hiring trends in the quarter, with several larger clients having an outsized impact. The strong Mountain and East Coast results also continue to be driven by strong controllable growth performance, and the Pacific Northwest has continued to be primarily soft due to economic conditions in the region. Turning to margin and profitability, our workers' compensation program continues to perform well and benefit from favorable claim frequency trends and favorable claim development. In Q3, we recognized favorable prior year liability and premium adjustments of $3.9 million compared to favorable adjustments of $4.3 million in 2024. We previously discussed that workers' compensation pricing has been trending downward for several years. While these pricing reductions have largely been offset by cost savings, they have nonetheless created some margin pressure. Looking at our overall margin for the year, results are broadly in line with expectations, though modestly lower than prior year due to a combination of this pricing pressure and lower staffing volume. As a reminder, our staffing business carries a higher margin rate than our PEO services. Looking ahead, we are optimistic about the pricing environment. The California insurance commissioner recently approved an average 8.7% increase in workers' compensation premium rates, and several carriers in the state have filed for similar rate increases. We're also seeing increased pricing and competitor renewal quotes for both workers' compensation and health benefits, which is leading to more shopping in the market. As a reminder, our workers' compensation claims are primarily fully insured, and our client health benefits offering is 100% fully insured. Our strategy of derisking our insurance operations continues to bring stability to our operating results while continuing to allow us to offer best-in-class high-value products to our small business customers. Moving to our operating costs and overall profitability, our results have continued to benefit from operating leverage, with SG&A costs continuing to grow more slowly than our billings and gross margin. For Q3, SG&A expense increased by approximately 2% due primarily to employee-related costs. Looking at investment income, our investment portfolio has earned $1.9 million in the third quarter, down approximately $300,000 from the prior year due to lower average interest rates. Our investment portfolio continues to be managed conservatively, with an average quality of investment in double A. The combined results of these activities was 7% growth in net income per diluted share in the third quarter to $0.79 compared to $0.74 per diluted share in the year-ago quarter. Our balance sheet remains strong with $110 million of cash and investments at September 30 and no debt. We continue our consistent approach to capital allocation, making investment back into the company through product enhancements and geographic expansion, and distributing excess capital to our shareholders through our dividend and stock repurchase plan. Continuing under the board's August 2025 buyback program, announced last quarter, Barrett Business Services, Inc. repurchased $8 million of shares in the third quarter at an average price of $47 per share. The company also paid $2.1 million in dividends in the quarter and reaffirmed its dividend for the following quarter. This brings a return of capital to shareholders to $10 million in the quarter and $31 million year to date. Now turning to our outlook for the full year. We now expect gross billings growth between 8.5% and 9.5% for the year after adjusting for the slower client hiring in the quarter. We continue to expect our year-end controllable growth to be strong, and WSEs to increase between 6% and 8% for the year. Given my earlier comments on pricing and margin, we are tightening our range for gross margin as a percent of gross billings and expect it to be between 2.9% and 3.0%. Finally, we continue to expect our effective annual tax rate to be between 26% and 27%. I will now turn the call back to the operator for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. First question comes from the line of Jeff Martin from Roth Capital Partners. Your line is now open. Jeff Martin: Thanks. Good afternoon, Gary and Anthony. Appreciate you taking the questions. Guess, let's start on the Barrett Business Services, Inc. benefits. Curious how policies are performing. I know there's a lot of noise out there in the market right now and claims costs are rising at an unexpected rate. Just curious to get your perspective on that and how it might be impacting your policies. I know you don't take the risk, but still curious. Gary Edward Kramer: Yeah. I mean, that's an important part, Jeff, is we don't take the risk on health insurance, and we've derisked on the workers' comp. But at the end of the day, we've got to be good stewards of capital and good underwriters, and we're in a good spot. You know, you've got a lot of carriers on the program. You're in many different states. But the one thing that's common is rates are going up. And they're going up for every carrier and every state for everybody. You know, you're seeing that with all of the public insurance companies and the rate filings and everything going on. So I can just tell you that I don't think our rates are going up any more than anybody else's. But what I think we're seeing is just when folks are getting rate increases, depending upon the size of the company and the size of the program they're in and if it's priced to risk, they're seeing some larger increases. And when that happens, you're seeing a lot more accounts go out to market. So our volume, what's coming into us for one-one business, through October was about 60% higher than what we saw or 60% more opportunities than we saw in the prior year. I think that's twofold. Right? Hey. It's the market, but b, we're better at our craft and referral partners trust us and referral partners are comfortable recommending us. So, ultimately, we're viewing this as an opportunity. Our renewal book is not as big as, you know, a lot of our competitors in the space. So we can spend more time on offense than defense. Jeff Martin: Great. And just was curious with record WSE ads in the quarter. Actually, it's been some of that, by the way. But just curious, how much do you think might be Barrett Business Services, Inc. benefits is driving that? Because you clearly outperforming the industry. Gary Edward Kramer: You know, we've been getting this question every quarter for the last couple of quarters, and it's not honestly not one thing. It's many things. We've between our tech, between our product, between our people, between our sales efforts. You know, it's in the new markets, we're getting good results in our new markets. It's really, you know, nine or 10 different things we've been working on, and we're feeling the tailwind from those 10 things. It's not one thing. It was a lot of years of hard work to get to where we are. Jeff Martin: Okay. Last one for me is on the workers' comp side. With rates finally going up, I know you've called your shot many times and it hasn't happened yet. But just I'm curious. Just curious if you think we might see some growth acceleration on a WSE basis in 2026 as a result of that and how you think about 2026 WSE growth in general? Gary Edward Kramer: I'll talk about just the comp market. I'll let Anthony come in on the WSEs. You know, we're seeing you saw the regulator approve rate increases. It's mainly California where we're seeing the rate increases. So let me preface it with that. But you're seeing the regulator make recommendations and approve rate increases. We're seeing carrier filings increase, you know, to about eight to 10%. And then we started to get into the ten-one renewal cycle, by that time, things were baked in and we were seeing, you know, incumbent renewals start to have price increases. So with that triangulation, we kinda know that rates are going up that way, and we're not going to be shy about asking for more rate too because more rate is warranted in the industry. So, you know, we have the pricing and the discipline and the process to make sure that we're gonna go and try to capture those rate increases, and we're working on that now for Q4 and for Q1. And then, honestly, time's gonna tell. We're not into the one-one workers' comp cycle yet, and that's probably not gonna really start until two more weeks. It's a slower or it's a later process than the benefits because you don't have to go through the enrollment for all the employees and whatnot. So right now we're heavy in the mix for the benefits side. And then as soon as we get through that, we get into the workers' comp one-one. So probably about forty-five days away from knowing. We're no. We're probably about thirty days away from knowing, you know, how much business is gonna go to market on the workers' comp side. Yeah. On the WSE ad trend going into 2026, as Gary said, there's not really one thing driving that. It's a combination of factors. They're all working well. And that momentum is building from 2024 and we continue to set those records as we continue to increase that volume. So going into '26, there's nothing that indicates that controllable growth momentum should slow down for us. Very helpful. Thank you. Operator: Your next question comes from the line of Chris Moore from CJS Securities. Your line is now open. Chris Moore: Hey. Good afternoon, guys. Thanks for taking a couple. So recognizing you're not providing, you know, fiscal twenty-six guidance, when you look at the gross billings estimate for this year, 8.5 to 9.5, what are the key variables that could make it, you know, meaningfully lower or higher in '26? Gary Edward Kramer: Yeah. I mean, there's no, you know, there's no change in the formula. Right? That's why we break it out the way we do. It's the controllable growth, which we've got a very good handle on. Right? We're good at bringing on business. We're good at keeping the business we have. Right? That is one of the that's the lion's share of our growth this year and we probably anticipate that to be the lion's share of the growth next year. And then wage inflation is gonna happen no matter what. It'll probably be less than we've had, you know, coming out of the pandemic. And then, you know, the known unknown is do our clients add workforce or shrink workforce? You know, it's hard to say what's gonna happen for that in twenty-six. The way we're modeling it now is, you know, if we think of how we started our year this year, we gave our initial guide and then we moved our guide up, you know, we're conservative when we guide. That's probably how we would think of the guide as we got out into February. Chris Moore: Sounds good. Obviously, the light model is working well. I'm just trying to estimate what kind of growth percentage growth you could get over the next, say, five years from a geographic, you know, from geographic expansion? Can you get a point, you know, per year out of geographical expansion? Is that modest? Is that aggressive? Just trying to understand kinda how you're looking at that. Gary Edward Kramer: Sorry. I'm doing math on my calculator here. Yeah. I mean, we'll finish, you know, from what we add this year, we'll finish with over, you know, plus or minus 2,000 WSEs that we're gonna add from our asset-light model. And if you do that math, that's, you know, call that a point and a half for this year. For WOC growth. Next year, I think we'll do better than that 2,000. So I think our growth we can get out of there would be, you know, 2% plus on a WSE basis. Chris Moore: Got it. I will leave it there. Appreciate it, guys. Operator: Your next question comes from the line of Vincent Colicchio from Barrington Research. Your line is now open. Vincent Colicchio: Yeah, Gary. Nice quarter on WSE editions, and just curious what the new client pipeline looks like, versus the year ago and sequential periods. I assume it's Gary Edward Kramer: Yeah. I mean, we have a lot of effort on, you know, getting our taking the top of the funnel filled. And then after you get to the top of the funnel, how do you get the discovery meetings with their clients? How do we working with the prospects? How do we get to our consultative sale? We've got a very good process and good focus and attention on, you know, making sure that we're hitting our metrics and our numbers. Everybody kinda knows what they gotta get done, and everybody's working to get it done. And you're seeing the good results of that. And honestly, we're, you know, it's one of those situations where we have more business in the funnel now than we did this time last year by a healthy percentage more, especially with the benefits side. Vincent Colicchio: That's great to hear. And then what are your expectations for existing client? And, has your view of the overall economy changed given the weakness in California, or do you? Growth in Q4? Think it's transitory? Gary Edward Kramer: Laughing because transitory is one of those words that I think has been ruined by the Fed here. You know, if we just think of, you know, for what happened with our clients in Q3. Right? So Q1, our clients grew. Q2, our clients got back to flat. Q3, our clients started to reduce. The reduction was predominantly all of California. And in California, it was skewed to Northern Cal. And when you peel back and you look at the clients and the industries that they're in Northern Cal, you know, the number one that we saw in Q3 is the construction and the trades. And that's one that I think is transitory. We looked at, you know, clients we talked to and the data we looked at, the new housing starts around the San Francisco Bay Area dropped precipitously in Q3. Our clients had to, you know, reduce workforce to accommodate that lack of business. The positive there for why I think that industry specifically is transitory because the clients we're talking to have orders for new home starts. And we think that we're gonna see benefit for them to rehire back in Q4 from the clients we're talking to. So that's the transitory. The ones that I don't believe are transitory are the our next one that shrunk. And this was Northern Cal and Southern Cal was transportation and logistics. And it's not a lot, but it's less than zero. Right? So we had them go negative. So transportation and logistics, you know, Q1, we saw that business go up as folks were trying to get ahead of tariffs. Q3 came down as they were absorbing tariffs. Or Q2, it came down. Q3, it came down more. I don't know if that one's gonna rebound. I think that one, you know, depending upon where we are, may stay there for a little bit. And then the other one that we saw, the third biggest was it or not, was our retail shops and our retail shops that are predominantly franchises. We do a lot of work with franchisees. And those franchisee business on the retail food front, we saw them pull back in Q3. And from what I'm reading with in that open market with the Chipotles and stuff like that, I feel like our clients weren't alone in that space. So I don't believe that one's gonna come back either, but construction is one of our bigger industries. And if construction comes back, it makes up for all the Vincent Colicchio: And you had mentioned that your platform is connected to third-party services. Are you seeing any meaningful revenue from that as of yet? Gary Edward Kramer: That's not, you know, when we integrate with third-party systems, predominantly, it's to provide better services and better value. It's not to do the upcharge. Right? So if we hook into their GL or we hook into a different timekeeping or we hook into a different, you know, bunch of different systems, it's, you know, call it ease of business for the client and another reason why they would stay with us because we handle servicing for them. It's a think of it as another barb in the hook for why our retention stays up so high. Vincent Colicchio: Okay. I'll go back in the queue. Thanks. Operator: Your next question comes from the line of Marc Riddick from Sidoti. Your line is now open. Marc Riddick: Hey. Good evening. Wanted to touch on a couple of things. First, maybe we could start with your thoughts early thoughts on Chicago and Dallas openings. Whether there was anything that stood out as to maybe being different than what you were expecting there. And then how that sort of plays into what you're looking at for Nashville in the early part of next year? Gary Edward Kramer: Sure. That was, you know, we did the grand opening for both branches, Chicago and Dallas in September, and it was a fun event. The folks that were building out those branches and the teams there, it was a big moment of accomplishment for them that they got to display their office. They had referral partners there. They had clients come in. I mean, it was just a nice feeling of they've been working really hard to get it done. They got it done, and it was a great accomplishment. And it was really good. Both branches did an excellent job where they had clients, referral partners, and folks from the community, and folks in their business community and their business adviser groups all there celebrating their success. So overall, both were great and both I'm proud of both of them for what they've done. Marc Riddick: Excellent. Then I wanted to shift over to the product IT product objectives that you discussed in the focus of white-collar and larger enterprises. Are there any sort of particular areas that you see as opportunities there, that you're more excited about than others or maybe how that sort of and to what extent, if any, it sort of plays into the overall AI strategy that's out there. Gary Edward Kramer: Yeah. Like, you can't talk about anything without having AI in it, but, you know, just in general, like, we're I had to sneak it in where I could. I mean, in general, we're building the technology. We're building it with the most up-to-date technology that's AI-enabled. If you think of the employee life cycle, it's everything from hire to retire in between, and we're working to fill those holes, and we're gonna have a product launch in, you know, in January. We're gonna have a product launch in March. After we have the product launches, we can continue to make investments. But, really, what we're gonna get to is a, you know, a comprehensive, what the industry calls, human resource information systems. So a comprehensive platform that has all of that. And really, that platform, when you get into the white-collar, when you get the larger more sophisticated clients, they look for you to have that platform. So I think we're gonna have, you know, good tech with good integrations with great people. And I think that when you put that up against any other tech platform, if you can go tech-tech and have great people that are there locally to support it, why would you not go with Barrett Business Services, Inc.? Marc Riddick: Great. And then I appreciate you sharing the net promoter score update. That's always really helpful and important. I wanted to, maybe the last one for me. On the 60% increase on as far as, you know, is there sort of anything that you saw there as far as the mix of those is similar is it similar to your existing mix or is there any differentiation that you saw maybe perk up whether it's in a client vertical or by enterprise size? Thank you. Gary Edward Kramer: Yeah. Good question. I would say it's nothing different than the construction of the existing portfolio of clients. It's really, you know, if you think of why somebody joins Barrett Business Services, Inc., like, we don't care if it's for payroll, if it's for HR, if it's for workers' comp, if it's for benefits. Right? Whatever they join us for, we, you know, we can sell that product. Then after we sell that product, we can bring the best of Barrett Business Services, Inc. And when we wrap, when we wrap the product with the best of Barrett Business Services, Inc., that's why we get the retention we get. Right? If we can bring them in for benefits and then, you know, keep them and do the HR, then great. We bring them in for comp and wrap the services, then great. So just in general, we try to find their pain point, try to solve their pain point, and bring them the rest that all that we have to offer. So we don't we're not targeting vertical a or vertical b or white-collar this or blue-collar that. It's really what problem can we help that client solve, and then how do we solve problems that they didn't even know they had. Marc Riddick: Great. Thank you very much. Operator: As a reminder, if you wish to ask a question, please press 1 on your telephone keypad. Your next question comes from the line of Bill Dezellem from Tieton Capital. Your line is now open. Bill Dezellem: Thank you. Gary, you referenced the WSE change Q1 to Q2 to Q3. Did the hours worked trends mirror those full WSE numbers? Anthony J. Harris: Yeah. Bill, this is Anthony. We have seen a slight reduction in average hours worked. So, yeah, we noted that last quarter in my remarks. I'm not sure if I included that this time. It wasn't actually quite as significant this time, but it was a small decrease year over year in hours worked as well. So that is part of the overall softening trend that we're seeing. Bill Dezellem: Okay. Thank you. And then relative to the increase that you referenced in the health care quote pipeline here in October versus a year ago. If you have your normal level of wins coming out of that quoting process, is the incremental impact on 2025? Excuse me. On 2026 next year. Gary Edward Kramer: Simple math would be it would be if closing rates stay the same, it'd be 6% better, but we're not gonna we're not gonna give it, you know, 60% better than we did in '25. And we had a great '25, if you could remember, for the one-one selling season, but we're not gonna I'm not gonna this is a little bit of uncertain market because of how much these rates are going up for certain carriers, and I'm gonna reserve my right to talk about that one at the Q4 call. Bill Dezellem: Okay. Well, thank you for giving me some words but without any answers. And let me shift, if I may, as you look at that quote pipeline, that 60% increase, what's the average size of the businesses that you're quoting versus either a year ago or just versus what you typically would end up having in your normal pipeline for new prospects. Essentially, trying to understand if the health insurance is leading to a skewing of size of business one direction or another. Gary Edward Kramer: It's a good question. I can give it to you in the total. I don't have it for what's health insurance. But for clients we brought on this year, they've averaged about two worksite employees greater than what we brought on last year. Bill Dezellem: And would you please remind us the base? Gary Edward Kramer: Got me, Bill. Gotta tell the world I don't have my glasses on me and I can't read this. It's the fine print that gets us all. I can tell you it's too I wanna say it's I don't I can't see it. I can't see it? It's embarrassing for me to say that, but Bill Dezellem: It is what it is. Okay. So here's the conceptually then, are you seeing either health insurance or anything else that you are providing that is specifically increasing the average size, or is it truly a combination of all of the puzzle? And then are there any I guess my follow-on question to that is, are there any other interesting stats that are coming out of your new clients this year versus prior years? Gary Edward Kramer: I would say, you know, it starts with having good people that understand how to position Barrett Business Services, Inc. We put a lot of work into that. It's having good products for them to position, and we put a lot of work into that. It's having referral partners that understand your value prop and are comfortable that you're gonna execute them. We'll put that in front of your in front of their clients, and we've really executed on that. So that's kind of the three-prong. But in general, right, you know, our tech is better. Our products, we have benefits. There's a lot of things we've been working on. That lean to a larger client. So it's not just one thing. It's the combination of all those things. So bottom line, if your WSEs from existing clients were to stay flat, it sounds like you would be anticipating an increasing rate of growth from your new client ads both because the number of new client adds would be increasing but also the number of WSEs per account would be higher. Gary Edward Kramer: I would say the, you know, it's not so much as reason we're growing is because we're adding larger clients. Like, the two on the average doesn't really skew it that much. It's really the velocity that we're bringing on clients. And I don't see that velocity slowing down. Bill Dezellem: Great. Thank you. Appreciate you taking the time, and have fun at the eye doctor. Operator: There are no further questions at this time. I will now turn the call over to Mr. Gary Edward Kramer. Please continue, sir. Gary Edward Kramer: Just want to take the time to thank all those at Barrett Business Services, Inc. for a great quarter. And keep doing what you're doing. Everybody appreciates your hard work. Thank you, everybody. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
