BARRETT BUSINESS SERVICES INC 10-K

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company is a leading provider of business management solutions for small and mid-sized companies. The Company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. This platform, through the effective leveraging of human capital, helps our business owner clients run their businesses more effectively. We believe this platform, delivered through a decentralized organizational structure, differentiates BBSI from our competitors. We report revenues in our financial results in two categories of services: professional employer services (“PEO”) and staffing. With our PEO clients, we enter into a co-employment arrangement in which we become the administrative employer while the client maintains physical care, custody and control of their workforce. Our PEO services are billed as a percentage of client payroll; the gross amount invoiced includes direct payroll costs and employee benefits coverage (if provided), plus an additional percentage amount to cover employer payroll-related taxes, workers’ compensation coverage (if provided), other service-related costs and a margin. However, actual costs can be higher or lower than anticipated. PEO customers are invoiced following the end of each payroll processing cycle, with payment generally due on the invoice date. Revenues for PEO services exclude direct payroll billings because we are not the primary obligor for those payments. We generate staffing services revenues primarily from short-term staffing, contract staffing, on-site management and direct placement services. For staffing services other than direct placement, invoiced amounts include direct payroll, an amount intended to cover employer payroll-related taxes, workers’ compensation coverage, other service-related costs and a margin. Staffing customers are typically invoiced weekly and generally have payment terms of 30 days. Direct placement services are billed at agreed fees at the time of a successful placement. Our business is concentrated in California, and we expect to continue to derive a majority of our revenues from this market in the future. Revenues generated in our California operations accounted for 72% of our total revenues in each of 2025, 2024 and 2023. Consequently, weakness in economic conditions, changes in the regulatory or insurance environment, or natural disasters or other major disruptive events in California could have a material adverse effect on our financial results. Our cost of revenues for PEO services includes employer payroll-related taxes, workers’ compensation costs and employee benefits costs. Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, and workers’ compensation costs. Direct payroll costs represent the gross payroll earned by staffing services employees based on salary or hourly wages. Payroll taxes and benefits consist of the employer’s portion of Social Security and Medicare taxes, federal and state unemployment taxes, and employee benefit costs, which primarily comprise health insurance premiums paid to third-party insurers and underwriting and benefit consultant payroll. Workers’ compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, third-party broker commissions, risk manager payroll, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, as well as costs associated with operating our two wholly owned insurance companies, Associated Insurance Company for Excess (“AICE”) and Ecole Insurance Company (“Ecole”). Selling, general and administrative expenses consist primarily of payroll and personnel related costs, incentive compensation, information systems costs, rent and professional and legal fees. Depreciation and amortization represent depreciation of property and equipment, leasehold improvements and internally developed software costs. Property, equipment and internally developed software costs are depreciated using the straight-line method over their estimated useful lives, which range from 3 to 39 years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. 27 Critical Accounting Estimate We have identified the following accounting estimate as critical to our business and the understanding of our results of operations. For a detailed discussion of the application of this and other accounting policies, see “Note 1 - Summary of Operations and Significant Accounting Policies” to the consolidated financial statements in Item 8 of Part II of this report. The preparation of this Annual Report on Form 10-K requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Workers' Compensation Costs Under the Company’s workers’ compensation programs, we estimate ultimate losses, which represent the amount necessary to pay claims and related expenses associated with workplace injuries that have occurred under the programs. When a claim involving a probable loss is reported, our independent third-party administrator for workers’ compensation claims (“TPA”) establishes a case reserve for the estimated amount of ultimate loss. The estimate reflects a judgment based on established case reserving practices and the experience and knowledge of the TPA regarding the nature and expected amount of the claim, as well as the estimated expenses of settling the claim, including legal and other fees and expenses of claims administration. The adequacy of such case reserves depends in part on the professional judgment of the TPA to evaluate the economic consequences of each claim properly and comprehensively. Our estimate of ultimate losses includes an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary. IBNR does not apply to a specific claim but rather applies to the entire population of claims arising from a specific time period. IBNR primarily covers costs relating to: • Future claim payments in excess of case reserves on recorded open claims; • Additional claim payments on closed claims; and • Claims that have occurred but have not yet been reported to us. The process of estimating claims and claims adjustment expense involves a high degree of judgment and is affected by both internal and external events, including changes in claims handling practices, modifications in reserve estimation procedures, changes in individuals involved in the reserve estimation process, inflation, trends in the litigation and settlement of pending claims, and legislative changes. Our estimates are based on actuarial analyses and informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses. We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known. Due to the inherent uncertainty underlying loss estimates, the ultimate expense incurred will likely vary from the related loss estimate at the reporting date. Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss estimates. A basic premise in most actuarial analyses is that historical data and past patterns demonstrated in the incurred and paid historical data form a reasonable basis upon which to project future outcomes, absent a material change. Significant structural changes to the available data can materially impact the estimation process. To the extent a material change affecting the ultimate claim amount becomes known, such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data. Actuaries exercise a considerable degree of judgment in the evaluation of these factors and the need for such actuarial judgment is more pronounced when faced with material uncertainties. 28 For claims incurred under the Company's self-insured programs, we record reserves equal to our estimate of the ultimate losses up to the retention limit, reduced by claim payments made. Third-party insurers assume substantially all risk of loss for claims incurred under the Company's fully insured arrangement. However, the Company's fully insured policies allow for return premiums if claims develop favorably, ranging from $20.0 million to $30.0 million depending on the policy period. For the policy period beginning July 1, 2021, BBSI can incur additional premiums up to $7.5 million if claims develop adversely. For all other policy years, no additional premiums can be charged based on claim performance. Our estimate of the losses associated with claims incurred under the fully insured policies directly impacts our estimate of the return premiums we may realize or the additional premiums that we may incur. The estimate we recorded for workers’ compensation costs was reduced by $18.7 million and $18.5 million in 2025 and 2024, respectively, due to changes in estimated losses for prior accident years. We believe that the amounts that we have recorded for our estimated workers’ compensation costs are reasonable. Nevertheless, adjustments to such estimates will be required in future periods if the development of claim costs varies materially from our estimates, and such future adjustments may be material to our results of operations. To illustrate the sensitivity of changes in our estimate of workers’ compensation costs, a 5% increase in estimated ultimate losses for the 2025 accident year would result in a $0.6 million increase in workers’ compensation expense, and a 5% decrease in estimated ultimate losses for the 2025 accident year would result in a $7.5 million decrease to workers’ compensation expense. This asymmetric impact on workers’ compensation expense is due to our insured program, which limits our expense if claim costs increase but passes through savings if claim costs are lower than expected. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements and their potential effect on the Company's results of operations and financial condition, see “Note 1 - Summary of Operations and Significant Accounting Policies” to the consolidated financial statements in Item 8 of Part II of this report. Forward-Looking Information Statements in this Annual Report on Form 10-K include forward-looking statements, which are not historical in nature and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, discussion of economic conditions in our market areas, especially in California, and their effect on revenue levels; the competitiveness of our service offerings; the availability of certain fully insured medical and other health and welfare benefits to qualifying worksite employees; our ability to attract and retain clients and to achieve revenue growth; the effect of changes in our mix of services on gross margin; labor market conditions, including the impact of AI and automation on workplace displacement; the adequacy of our workers' compensation reserves; the effect of changes in estimates of our future claims liabilities on our workers’ compensation reserves, including the effect of changes in our reserving practices and claims management process on our actuarial estimates; expected levels of required surety deposits and letters of credit; the outcome of audits; the effect of our formation and operation of two wholly owned licensed insurance subsidiaries; the risks of operation and cost of our insured program; the financial viability of our excess insurance carriers; the effectiveness of our management information systems; our relationship with our primary bank lender and the availability of financing and working capital to meet our funding requirements; litigation costs; the effect of inflationary pressures or changes in the interest rate environment on the value of our investment securities; the adequacy of our allowance for expected credit losses; and the potential for and effect of acquisitions. All our forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors with respect to the Company include: our ability to retain current clients and 29 attract new clients; technology disruption, including the displacement of employees through the adoption of AI and automation by our clients; difficulties associated with integrating clients into our operations; economic trends in our service areas and the potential effects of changing governmental policies, including those related to immigration, tariffs, other trade policies, or climate regulation; risks to our business and the business of our clients arising from current or future tariffs or other trade restrictions, supply chain issues, changes in labor force, or geopolitical instability, including the war in Ukraine, conflicts in the Middle East, and the potential for future conflicts or disruptions in other parts of the world; natural disasters; the potential for material deviations from expected future workers’ compensation claims experience; changes in the workers’ compensation regulatory environment in our primary markets; PEO client benefit costs, particularly with regard to health insurance benefits; security breaches or failures in the Company’s information technology systems; collectability of accounts receivable; changes in executive management; changes in effective payroll tax rates and federal and state income tax rates; the carrying values of deferred income tax assets and goodwill (which may be affected by our future operating results); the effects of inflation on our operating expenses and those of our clients; the impact of and potential changes to the Patient Protection and Affordable Care Act, escalating medical costs, and other health care legislative initiatives on our business; the effect of changing monetary policy, interest rates and conditions in the global capital markets on our investment portfolio; and the availability of capital, borrowing capacity on our revolving credit facility, or letters of credit necessary to meet state-mandated surety deposit requirements for maintaining our status as a qualified self-insured employer for workers' compensation coverage or our insured program. Additional risk factors affecting our business are discussed in Item 1A of Part I of this report. We disclaim any obligation to publicly announce any revisions to any of the forward-looking statements contained herein to reflect future events or developments. Results of Operations The following table sets forth the percentages of total revenues represented by selected items in the Company's consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023, included in Item 8 of Part II of this report. Percentage of Total Net Revenues ($ in thousands) Years Ended December 31, 2025 2024 2023 Revenues: Professional employer services $ 1,168,334 94.2 % $ 1,063,386 92.9 % $ 982,268 91.9 % Staffing services 71,964 5.8 81,145 7.1 87,039 8.1 Total revenues 1,240,298 100.0 1,144,531 100.0 1,069,307 100.0 Cost of revenues: Direct payroll costs 54,443 4.4 61,010 5.3 65,042 6.1 Payroll taxes and benefits 720,798 58.1 628,534 54.9 555,758 52.0 Workers’ compensation 204,144 16.5 201,736 17.6 205,975 19.2 Total cost of revenues 979,385 79.0 891,280 77.8 826,775 77.3 Gross margin 260,913 21.0 253,251 22.2 242,532 22.7 Selling, general and administrative expenses 190,494 15.4 185,869 16.2 174,772 16.3 Depreciation and amortization 8,256 0.7 7,601 0.7 7,110 0.7 Income from operations 62,163 4.9 59,781 5.3 60,650 5.7 Other income, net 9,236 0.7 11,041 1.0 8,338 0.8 Income before income taxes 71,399 5.6 70,822 6.3 68,988 6.5 Provision for income taxes 16,951 1.4 17,829 1.6 18,376 1.7 Net income $ 54,448 4.2 % $ 52,993 4.7 % $ 50,612 4.8 % 30 We report PEO revenues net of direct payroll costs because we are not the primary obligor for wage payments to our clients’ employees. However, management believes that gross billings and wages are useful in understanding the volume of our business activity and serve as an important performance metric in managing our operations, including the preparation of internal operating forecasts and establishing executive compensation performance goals. We therefore present for purposes of analysis gross billings and wage information for the years ended December 31, 2025, 2024 and 2023. Year Ended December 31, (in thousands) 2025 2024 2023 Gross billings $ 9,042,132 $ 8,327,091 $ 7,716,152 PEO and staffing wages $ 7,856,320 $ 7,245,093 $ 6,711,115 In monitoring and evaluating the performance of our operations, management also reviews the following ratios, which represent selected amounts as a percentage of gross billings. Management believes these ratios are useful in understanding the efficiency and profitability of our service offerings. Percentage of Gross Billings Year Ended December 31, 2025 2024 2023 PEO and staffing wages 86.9 % 87.0 % 87.0 % Payroll taxes and benefits 7.9 % 7.6 % 7.2 % Workers' compensation 2.3 % 2.4 % 2.7 % Gross margin 2.9 % 3.0 % 3.1 % We refer to employees of our PEO clients as worksite employees (“WSEs”). Management reviews average and ending WSE growth to monitor and evaluate the performance of our operations. Average WSEs are calculated by dividing the number of unique individuals paid in each month by the number of months in the period. Ending WSEs represents the number of unique individuals paid in the last month of the period. Year Ended December 31, 2025 Year-over-year % Growth 2024 Year-over-year % Growth 2023 Average WSEs 138,218 6.7 % 129,577 4.2 % 124,306 Ending WSEs 138,605 4.9 % 132,069 4.4 % 126,446 31 Years Ended December 31, 2025 and 2024 Net income for 2025 was $54.4 million compared to net income of $53.0 million for 2024. Diluted net income per share for 2025 was $2.08 compared to diluted income per share of $1.98 for 2024. Revenue for 2025 totaled $1,240.3 million, an increase of $95.8 million or 8.4% over 2024, which reflects an increase in the Company’s PEO service revenue of $104.9 million or 9.9% and a decrease in staffing services revenue of $9.2 million or 11.3%. The increase in PEO services revenues was primarily attributable to a 6.7% increase in average number of WSEs as well as a 2.4% increase in average billing per WSE per day. Gross margin for 2025 totaled $260.9 million or 21.0% of revenue compared to $253.3 million or 22.2% of revenue for 2024. The decrease in gross margin as a percentage of revenues is primarily a result of the factors discussed within the separate components of gross margin below. Direct payroll costs for 2025 totaled $54.4 million or 4.4% of revenue compared to $61.0 million or 5.3% of revenue for 2024. The decrease in direct payroll costs as a percentage of revenues was primarily due to a decrease in staffing services within the mix of our customer base in 2025 as compared to 2024. Payroll taxes and benefits for 2025 totaled $720.8 million or 58.1% of revenue compared to $628.5 million or 54.9% of revenue for 2024. The increase in payroll taxes and benefits expense as a percentage of revenue was primarily due to higher average payroll tax rates in 2025 and PEO client benefit costs of $75.6 million in 2025 compared to $33.4 million in 2024. Workers’ compensation expense for 2025 totaled $204.1 million or 16.5% of revenue compared to $201.7 million or 17.6% of revenue for 2024. The decrease in workers’ compensation expense as a percentage of revenue was primarily due to lower workers' compensation costs in the current year, which included favorable prior year liability and premium adjustments of $18.7 million in 2025, compared to favorable prior year liability and premium adjustments of $18.5 million in 2024. Selling, general and administrative (“SG&A”) expenses for 2025 totaled $190.5 million or 15.4% of revenue compared to $185.9 million or 16.2% of revenue for 2024. The increase of $4.6 million in SG&A expense was primarily attributable to increased employee-related costs. Other income, net for 2025 totaled $9.2 million compared to other income of $11.0 million for 2024. The decrease was primarily attributable to a decrease in investment income in 2025. Our effective income tax rate for 2025 was 23.7% compared to 25.2% for 2024. Our income tax rate typically differs from the federal statutory tax rate of 21% primarily due to state taxes as well as federal and state tax credits. See “Note 8 - Income Taxes” to the consolidated financial statements included in Item 8 of Part II of this report for additional information regarding income taxes. A discussion of our financial condition and results of operations for 2024 compared to 2023 can be found in Part II, Item 7. Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025. 32 Fluctuations in Quarterly Operating Results We historically have experienced significant fluctuations in our quarterly operating results, including losses or minimal income in the first quarter of each year, and expect such fluctuations to continue in the future. Our operating results may fluctuate due to a number of factors such as seasonality, wage limits on statutory payroll taxes, claims experience for workers’ compensation, demand for our services, and competition. Payroll taxes, as a component of cost of revenues, generally decline throughout a calendar year as the applicable statutory wage bases for federal and state unemployment taxes and Social Security taxes are exceeded on a per employee basis. Our revenue levels may be higher in the third quarter due to the effect of increased business activity of our customers’ businesses in the agriculture, food processing and forest products-related industries. In addition, revenues in the fourth quarter may be reduced by many customers’ practice of operating on holiday-shortened schedules. Workers’ compensation expense varies with both the frequency and severity of workplace injury claims reported during a quarter and the estimated future costs of such claims. Positive or adverse loss development of prior period claims during a subsequent quarter may also contribute to the volatility in the Company’s estimated workers’ compensation expense. Liquidity and Capital Resources The Company's cash balance of $126.3 million at December 31, 2025, which includes cash, cash equivalents, and restricted cash, increased $43.7 million for the twelve months ended December 31, 2025, compared to the cash balance of $82.6 million at December 31, 2024, with an increase of $7.7 million compared to 2024. The increase in cash at December 31, 2025 as compared to December 31, 2024 was primarily due to the factors discussed below. Net cash provided by operating activities in 2025 amounted to $66.0 million, compared to net cash provided by operating activities of $10.1 million for the comparable period of 2024. In 2025, net cash provided by operating activities was primarily due to net income of $54.4 million, increased accrued payroll and related benefits of $22.6 million, increased payroll taxes payable of $12.8 million, share-based compensation of $10.4 million, increased other accrued liabilities of $8.8 million and depreciation and amortization of $8.3 million, partially offset by decreased workers’ compensation claims liabilities of $23.6 million, decreased premium payable of $16.0 million and increased trade accounts receivable of $14.1 million. Net cash provided by investing activities totaled $30.8 million in 2025, compared to net cash provided by investing activities of $38.8 million for the comparable period of 2024. In 2025, net cash provided by investing activities consisted primarily of proceeds from the sale and maturity of investments and restricted investments of $93.6 million, partially offset by the purchases of investments and restricted investments of $44.0 million and the purchase of property, equipment and software of $18.8 million. Net cash used in financing activities in 2025 was $53.0 million compared to net cash used in financing activities of $41.1 million for the comparable period of 2024. In 2025, net cash used in financing activities primarily consisted of repurchases of common stock of $42.0 million and dividend payments of $8.2 million. The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”). The balance in the trust account was $175.3 million and $197.1 million at December 31, 2025 and December 31, 2024, respectively. The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s consolidated balance sheets. See “Note 5 - Revolving Credit Facility” to the consolidated financial statements included in Item 8 of Part II of this report for information regarding the Company’s credit agreement with Wells Fargo Bank, N.A. 33 Contractual Obligations The Company's contractual obligations as of December 31, 2025 are summarized below: As of December 31, 2025 Payments Due by Period (in thousands) Less than 1 - 3 4 - 5 After Total 1 Year Years Years 5 Years Operating leases (1) $ 27,516 $ 8,164 $ 12,135 $ 5,159 $ 2,058 Total contractual obligations $ 27,516 $ 8,164 $ 12,135 $ 5,159 $ 2,058 (1) As of December 31, 2025, the Company had no additional operating leases that have not yet commenced and remaining balances on short-term operating leases of $0.2 million, included in the table above. The Company has no long-term debt obligations as of December 31, 2025. Item 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to market risk for changes in interest rates primarily relates to its investment portfolio and outstanding borrowings on its line of credit. The Company's investments and restricted investments, which are classified as available-for-sale, consist primarily of fixed-rate debt securities, the fair value of which fluctuates with prevailing interest rates. Our cash equivalents consist primarily of money market funds, which are not meaningfully impacted by interest rate risk. We attempt to limit our investment portfolio's exposure to market risk through low investment turnover and diversification. Based on the Company's overall interest exposure at December 31, 2025, a 50-basis-point increase in market interest rates would have a $3.2 million downward effect on the fair value of the Company's investment portfolio. Outstanding borrowings on the Company's line of credit bear interest at a variable market rate, which makes the cost of borrowing on the line of credit susceptible to changing interest rates. At December 31, 2025, the Company had no outstanding borrowings on its line of credit. 34 Item 8. FINA NCIAL STATEMENTS AND SUPPLEMENTARY DATA REP ORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Barrett Business Services, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Barrett Business Services, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2026 , expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 35 Workers’ Compensation Costs Under the Company’s workers’ compensation programs management estimates ultimate losses, which represent the amount necessary to pay claims and related expenses associated with workplace injuries that have occurred under the programs. These estimates utilize actuarial expertise and projection techniques at a given reporting date, and are based on an evaluation of information provided by the Company’s third-party administrator for workers’ compensation claims, coupled with an actuarial estimate of future loss development with respect to reported claims and incurred but not reported claims (together, “IBNR”). The Company’s estimates are based on actuarial analysis and informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses. The Company considers significant facts and circumstances known both at the time that loss estimates are initially established, and as new facts and circumstances become known. Given the subjectivity of estimating future loss development with respect to reported claims and incurred but not reported claims, the related audit procedures to evaluate the ultimate incurred losses required a high degree of auditor judgment and an increased extent of effort, including involvement of our actuarial specialists. For claims incurred under the Company’s self-insured programs, the Company records reserves equal to their estimate of the ultimate losses up to the retention limit, reduced by claim payments made. The Company’s fully insured policies allow for return premiums if claims develop favorably, ranging from $20.0 million to $30.0 million, depending on the policy period. For the policy period beginning July 1, 2021, the Company can incur additional premiums up to $7.5 million if claims develop adversely. For all other policy years, no additional premiums can be charged based on claim performance. The estimate of the losses associated with claims incurred under the fully insured policies directly impacts the estimate of the return premiums the Company may realize or the additional premiums that they may incur. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the ultimate loss estimates included the following: • We tested the effectiveness of controls related to the workers’ compensation costs, including those involving management’s estimates and ultimate loss projections. • We tested the underlying data inputs that served as the basis for the actuarial analysis, including historical claims, for completeness and accuracy. • With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by management to estimate the ultimate losses by: o Performing a retrospective review, including comparing management’s prior year estimates of expected incurred losses to actual experience during the current year, to identify potential bias in the determination of the ultimate losses. o Developing a range of independent estimates of the ultimate losses, and comparing our estimated ranges to management’s estimates and assessed the consistency of management’s approach. /s/ Deloitte & Touche LLP Portland , Oregon February 25, 2026 We have served as the Company's auditor since 2016. 36 Barre tt Business Services, Inc. Consolidated B alance Sheets December 31, 2025 and 2024 (In Thousands, Except Par Value) December 31, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 95,033 $ 55,367 Investments 62,154 66,492 Trade accounts receivable, net 248,626 234,533 Income taxes receivable 2,965 2,662 Prepaid expenses and other 18,652 18,698 Restricted cash and investments 97,210 97,690 Total current assets 524,640 475,442 Property, equipment and software, net 67,230 56,781 Operating lease right-of-use assets 23,218 20,329 Restricted cash and investments 106,216 134,454 Goodwill 47,820 47,820 Other assets 9,869 6,205 Deferred income taxes 74 4,477 Total assets $ 779,067 $ 745,508 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,433 $ 6,787 Accrued payroll and related benefits 237,783 215,648 Payroll taxes payable 62,463 49,685 Current operating lease liabilities 6,969 6,231 Current premium payable 38,992 31,134 Other accrued liabilities 19,357 10,330 Workers' compensation claims liabilities 32,875 39,081 Total current liabilities 405,872 358,896 Long-term workers' compensation claims liabilities 75,709 89,365 Long-term premium payable 26,025 49,840 Long-term operating lease liabilities 17,484 15,215 Customer deposits and other long-term liabilities 12,977 10,788 Total liabilities 538,067 524,104 Commitments and contingencies (Notes 5, 7 and 11) Stockholders' equity: Common stock, $ .01 par value; 82,000 shares authorized, 25,179 and 25,784 shares issued and outstanding in 2025 and 2024, respectively 252 258 Additional paid-in capital 46,121 40,396 Accumulated other comprehensive loss ( 11,487 ) ( 19,245 ) Retained earnings 206,114 199,995 Total stockholders' equity 241,000 221,404 Total liabilities and stockholders' equity $ 779,067 $ 745,508 The accompanying notes are an integral part of these consolidated financial statements. 37 Barrett Business Services, Inc. Consolidated Statem ents of Operations Years Ended December 31, 2025, 2024 and 2023 (In Thousands, Except Per Share Amounts) Year Ended December 31, 2025 2024 2023 Revenues: Professional employer services $ 1,168,334 $ 1,063,386 $ 982,268 Staffing services 71,964 81,145 87,039 Total revenues 1,240,298 1,144,531 1,069,307 Cost of revenues: Direct payroll costs 54,443 61,010 65,042 Payroll taxes and benefits 720,798 628,534 555,758 Workers' compensation 204,144 201,736 205,975 Total cost of revenues 979,385 891,280 826,775 Gross margin 260,913 253,251 242,532 Selling, general and administrative expenses 190,494 185,869 174,772 Depreciation and amortization 8,256 7,601 7,110 Income from operations 62,163 59,781 60,650 Other income (expense): Investment income, net 9,259 11,130 8,643 Interest expense ( 171 ) ( 178 ) ( 166 ) Other, net 148 89 ( 139 ) Other income, net 9,236 11,041 8,338 Income before income taxes 71,399 70,822 68,988 Provision for income taxes 16,951 17,829 18,376 Net income $ 54,448 $ 52,993 $ 50,612 Basic income per common share $ 2.13 $ 2.03 $ 1.88 Weighted average number of basic common shares outstanding 25,613 26,076 26,921 Diluted income per common share $ 2.08 $ 1.98 $ 1.85 Weighted average number of diluted common shares outstanding 26,141 26,708 27,394 The accompanying notes are an integral part of these consolidated financial statements. 38 Barrett Business Services, Inc. Consolidated Statements of C omprehensive Income Years Ended December 31, 2025, 2024 and 2023 (In Thousands) Year Ended December 31, 2025 2024 2023 Net income $ 54,448 $ 52,993 $ 50,612 Unrealized gains on investments, net of tax of $ 2,910 , $ 595 , and $ 2,596 in 2025, 2024 and 2023, respectively 7,758 1,556 6,793 Comprehensive income $ 62,206 $ 54,549 $ 57,405 The accompanying notes are an integral part of these consolidated financial statements. 39 Barrett Business Services, Inc. Consolidated Statements of Stockholders' Equity Years Ended December 31, 2025, 2024 and 2023 (In Thousands) Accumulated Additional Other Common Stock Paid-in Comprehensive Retained Shares Amount Capital Loss Earnings Total Balance, December 31, 2022 27,483 $ 275 $ 32,538 $ ( 27,594 ) $ 172,623 $ 177,842 Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards 436 4 698 — — 702 Common stock repurchased on vesting of restricted stock units and performance awards ( 130 ) ( 1 ) ( 2,992 ) — — ( 2,993 ) Share-based compensation expense — — 8,465 — — 8,465 Company repurchase of common stock ( 1,499 ) ( 15 ) ( 1,966 ) — ( 32,211 ) ( 34,192 ) Cash dividends on common stock ($ 0.30 per share) — — — — ( 8,089 ) ( 8,089 ) Unrealized gain on investments, net of tax — — — 6,793 — 6,793 Net income — — — — 50,612 50,612 Balance, December 31, 2023 26,290 $ 263 $ 36,743 $ ( 20,801 ) $ 182,935 $ 199,140 Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards 497 5 926 — — 931 Common stock repurchased on vesting of restricted stock units and performance awards ( 153 ) ( 2 ) ( 4,835 ) — — ( 4,837 ) Share-based compensation expense — — 8,840 — — 8,840 Company repurchase of common stock ( 850 ) ( 8 ) ( 1,278 ) — ( 27,847 ) ( 29,133 ) Cash dividends on common stock ($ 0.31 per share) — — — — ( 8,086 ) ( 8,086 ) Unrealized gain on investments, net of tax — — — 1,556 — 1,556 Net income — — — — 52,993 52,993 Balance, December 31, 2024 25,784 $ 258 $ 40,396 $ ( 19,245 ) $ 199,995 $ 221,404 Common stock issued on exercise of options, purchase of ESPP shares and vesting of restricted stock units and performance awards 575 6 3,195 — — 3,201 Common stock repurchased on vesting of restricted stock units and performance awards ( 144 ) ( 2 ) ( 6,029 ) — — ( 6,031 ) Share-based compensation expense — — 10,360 — — 10,360 Company repurchase of common stock ( 1,036 ) ( 10 ) ( 1,801 ) — ( 40,147 ) ( 41,958 ) Cash dividends on common stock ($ 0.32 per share) — — — — ( 8,182 ) ( 8,182 ) Unrealized gain on investments, net of tax — — — 7,758 — 7,758 Net income — — — — 54,448 54,448 Balance, December 31, 2025 25,179 $ 252 $ 46,121 $ ( 11,487 ) $ 206,114 $ 241,000 The accompanying notes are an integral part of these consolidated financial statements. 40 Barrett Busi ness Services, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2025, 2024 and 2023 (In Thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities: Net income $ 54,448 $ 52,993 $ 50,612 Reconciliations of net income to net cash provided by operating activities: Depreciation and amortization 8,256 7,601 7,110 Non-cash operating lease expense 6,846 6,470 7,036 Investment amortization (accretion) and losses (gains) recognized 407 ( 221 ) 1,396 Losses recognized on disposal of property and equipment 72 65 256 Deferred income taxes 1,492 ( 854 ) 4,626 Share-based compensation 10,360 8,840 8,465 Changes in certain operating assets and liabilities: Trade accounts receivable ( 14,093 ) ( 63,126 ) ( 7,569 ) Income taxes ( 303 ) 5,325 ( 8,597 ) Prepaid expenses and other 46 ( 255 ) 1,344 Accounts payable 646 194 ( 1,671 ) Accrued payroll and related benefits 22,597 55,170 5,698 Payroll taxes payable 12,778 ( 23,465 ) 7,030 Other accrued liabilities 8,785 ( 736 ) ( 4,177 ) Premium payable ( 15,957 ) 7,886 54,168 Workers' compensation claims liabilities ( 23,558 ) ( 39,350 ) ( 51,246 ) Operating lease liabilities ( 6,728 ) ( 6,668 ) ( 7,099 ) Other assets and liabilities, net ( 139 ) 218 ( 160 ) Net cash provided by operating activities 65,955 10,087 67,222 Cash flows from investing activities: Purchase of property, equipment and software ( 18,777 ) ( 14,160 ) ( 11,827 ) Proceeds from sale of property and equipment — 8 120 Purchase of investments ( 7,668 ) ( 7,902 ) ( 4,387 ) Proceeds from sales and maturities of investments 15,983 23,319 10,352 Purchase of restricted investments ( 36,350 ) ( 29,971 ) ( 66,734 ) Proceeds from sales and maturities of restricted investments 77,573 67,491 17,289 Net cash provided by (used in) investing activities 30,761 38,785 ( 55,187 ) Cash flows from financing activities: Proceeds from credit-line borrowings 4,508 415 12,313 Payments on credit-line borrowings ( 4,508 ) ( 415 ) ( 12,313 ) Repurchase of common stock ( 41,958 ) ( 29,133 ) ( 34,192 ) Common stock repurchased on vesting of restricted stock units and performance awards ( 6,031 ) ( 4,837 ) ( 2,993 ) Dividends paid ( 8,182 ) ( 8,086 ) ( 8,089 ) Proceeds from exercise of stock options and purchase of ESPP 3,201 931 702 Net cash used in financing activities ( 52,970 ) ( 41,125 ) ( 44,572 ) Net increase (decrease) in cash, cash equivalents and restricted cash 43,746 7,747 ( 32,537 ) Cash, cash equivalents and restricted cash, beginning of period 82,588 74,841 107,378 Cash, cash equivalents and restricted cash, end of period $ 126,334 $ 82,588 $ 74,841 The accompanying notes are an integral part of these consolidated financial statements. 41 Barrett Business Services, Inc. Notes to Consolidated Financial Statements Note 1 - Summary of Operations and Significant Accounting Policies Nature of operations Barrett Business Services, Inc. (“BBSI” or the “Company”), is a leading provider of business management solutions for small and mid-sized companies. The Company has developed a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. This platform, through the effective leveraging of human capital, helps our business owner clients run their businesses more effectively. We believe this platform, delivered through our decentralized organizational structure, differentiates BBSI from our competitors. The Company supports clients with a local presence in 69 markets throughout the United States. Approximately 72 % of our revenue during each of 2025, 2024 and 2023 was attributable to our California operations. BBSI was incorporated in Maryland in 1965. The Company operates a wholly owned, fully licensed captive insurance company, Associated Insurance Company for Excess ("AICE") and a wholly owned, fully licensed insurance company, Ecole. AICE and Ecole provide access to more competitive and cost-effective insurance markets and provide cost-effective risk management. See “Note 4 - Workers’ Compensation Claims” for additional information on the Company’s insurance programs. Principles of consolidation The accompanying financial statements are prepared on a consolidated basis. All intercompany account balances and transactions between BBSI, AICE, and Ecole have been eliminated in consolidation. Reportable segment BBSI has one operating and reportable segment which provides business management solutions to small and mid-sized companies. The Company’s Chief Executive Officer is the chief operating decision maker (“CODM”). The CODM is provided financial information presented on a consolidated basis, including consolidated gross margin and consolidated net income, to assess the financial performance of the Company and to decide how to allocate resources, including by reinvesting profits into our single operating segment or pursuing other strategic initiatives, such as stock repurchases or acquisitions. The financial information presented to the CODM, including the expense categories, is consistent with the financial information contained in these consolidated financial statements. The accounting policies of our reportable segment are the same as those of the consolidated entity. BBSI derives revenue exclusively in the United States and all of the Company’s long-lived assets are located in the United States. Revenue recognition Professional employer (“PEO”) services are normally used by organizations to satisfy ongoing needs related to the management of human capital and are governed by the terms of a client services agreement which covers all employees at a particular work site. Staffing revenues relate primarily to short-term staffing, contract staffing and on-site management services. The Company’s performance obligations for PEO and staffing services are satisfied, and the related revenue is recognized, as services are rendered by our workforce. Our PEO client service agreements have a minimum term of one year , are renewable on an annual basis and typically require 30 days’ written notice to cancel or terminate the contract by either party. In addition, our client service agreements provide for immediate termination upon any payment default of the client regardless of when notice is given. PEO customers are invoiced following the end of each payroll 42 processing cycle, with payment generally due on the invoice date. Staffing customers are generally invoiced weekly based on agreed rates per employee and actual hours worked, typically with payment terms of 30 days. The amount of earned but unbilled revenue is classified as a receivable on the consolidated balance sheets. We report PEO revenues net of direct payroll costs because we are not the primary obligor for these payments to our clients’ employees. Direct payroll costs include salaries and wages, client-provided health insurance, and employee out-of-pocket expenses incurred incidental to employment. Cost of revenues Our cost of revenues for PEO services includes employer payroll-related taxes, workers' compensation costs, and employee benefits costs. Our cost of revenues for staffing services includes direct payroll costs, employer payroll-related taxes, and workers’ compensation costs. Direct payroll costs represent the gross payroll earned by staffing services employees based on salary or hourly wages. Payroll taxes consist of the employer's portion of Social Security and Medicare taxes and federal and state unemployment taxes. Benefit costs primarily comprise health insurance premiums paid to third-party carriers as part of our fully insured PEO benefits programs and underwriting and benefit consultant payroll. Workers' compensation costs consist primarily of premiums paid to third-party insurers, claims reserves, third-party broker commissions, risk manager payroll, claims administration fees, legal fees, medical cost containment (“MCC”) expense, state administrative agency fees, as well as costs associated with operating our two wholly owned insurance companies, AICE and Ecole. Cash and cash equivalents We consider non-restricted short-term investments that are highly liquid, readily convertible into cash, and have maturities at acquisition of less than three months to be cash equivalents for purposes of the consolidated statements of cash flows and consolidated balance sheets. The Company maintains cash balances in bank accounts that normally exceed FDIC insured limits. The Company has not experienced any losses related to its cash concentration. Investments The Company classifies investments as available-for-sale. The Company’s investments are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders' equity. Investments are recorded as current on the consolidated balance sheets as the invested funds are available for current operations. Management considers available evidence in evaluating potential impairment of investments, including the extent to which fair value is less than cost and adverse conditions related to the security. In the event of a credit loss, an allowance would be recognized to the extent that the fair value of the security is less than the present value of the expected future cash flows. Realized gains and losses on sales of investments are included in investment income, net in our consolidated statements of operations. Investment income, net in the consolidated statements of operations includes interest income of $ 8.7 million, $ 10.9 million, and $ 9.1 million for the years ended December 31, 2025, 2024 and 2023 , respectively. 43 Restricted cash and investments The Company holds restricted cash and investments primarily for the future payment of insurance premiums and workers’ compensation claims. These investments are categorized as available-for-sale. They are reported at fair value with unrealized gains and losses, net of taxes, shown as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Restricted cash and investments are classified as current and noncurrent on the consolidated balance sheets based on the nature of the restriction. Management considers available evidence in evaluating potential impairment of restricted investments, including the extent to which fair value is less than cost and adverse conditions related to the security. In the event of a credit loss, an allowance would be recognized to the extent that the fair value of the security is less than the present value of the expected future cash flows. Realized gains and losses on sales of restricted investments are included in investment income in our consolidated statements of operations. Restricted cash and investments also includes investments held as part of the Company’s deferred compensation plan. These investments are classified as trading securities and are recorded at fair value with unrealized gains and losses reported as a component of income (loss) from operations. Concentration of credit risk Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, investments, restricted cash and investments, and trade accounts receivable. We limit investment of cash equivalents and investments to financial institutions with high credit ratings. Credit risk on trade accounts is minimized as a result of the large and diverse nature of our customer base. Trade accounts receivable PEO customers are invoiced following the end of each payroll processing cycle with payment generally due on the invoice date and staffing customers are generally invoiced weekly with payment terms of 30 days. The balance in trade accounts receivable is comprised primarily of unbilled receivables of $ 241.5 million and $ 218.8 million at December 31, 2025 and 2024, respectively. The remaining balance of $ 7.5 million and $ 16.6 million in trade accounts receivable at December 31, 2025 and 2024, respectively, is primarily related to outstanding billings to staffing and PEO clients, offset by an allowance for expected credits losses of $ 0.4 million and $ 0.9 million at December 31, 2025 and 2024, respectively. Allowance for expected credit losses The Company had an allowance for expected credit losses of $ 0.4 million and $ 0.9 million at December 31, 2025 and 2024, respectively. We make estimates of the collectability of our accounts receivable for services provided to our customers based on future expected credit losses. Management analyzes historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customers' payment trends when evaluating the adequacy of the allowance for expected credit losses. If the financial condition of our customers deteriorates resulting in an impairment of their ability to make payments, additional allowances may be required. Our allowance for expected credit losses activity is summarized as follows (in thousands): 2025 2024 2023 Balance at January 1, Allowance for expected credit losses $ 885 $ 885 $ 893 Charges to expense 279 72 98 Write-offs of uncollectible accounts, net of recoveries ( 814 ) ( 72 ) ( 106 ) Balance at December 31, Allowance for expected credit losses $ 350 $ 885 $ 885 44 Income taxes Our income taxes are accounted for using an asset and liability approach. This requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities at the applicable tax rates. A valuation allowance is recorded against deferred tax assets if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the Company’s forecast of the reversal of temporary differences, future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings. The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities. The tax benefit is measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate settlement. As facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Goodwill and intangible assets Goodwill is recorded as the difference, if any, between the aggregate consideration paid for a business combination and the fair value of the net assets acquired. Goodwill is not amortized but is evaluated for impairment annually, or more frequently if circumstances indicate that it is more likely than not that the fair value of the operating segment is below its carrying value. The Company has one operating and reportable segment and evaluates the carrying value of goodwill annually at December 31. No impairment has been recognized in the periods presented. Property, equipment and software Property, equipment and software are stated at cost. Expenditures for maintenance and repairs are charged to selling, general and administrative expenses as incurred and expenditures for additions and improvements to property and equipment are capitalized. The cost of assets sold or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in the consolidated statements of operations. We capitalize software development costs incurred during the application development stage, which is the stage when preliminary project planning ends and software development begins. Capitalized costs generally include both internal and external costs directly related to the development of the software. Capitalized costs are amortized on a straight-line basis over the estimated useful life, commencing when the software is placed into service. Costs incurred during the preliminary project stage and the post-implementation stage, as well as general and administrative and overhead costs, are expensed as they are incurred. Depreciation of property and equipment and amortization of software is calculated using the straight-line method over estimated useful lives of the related assets or lease terms, as follows: Years Buildings 39 Equipment, furniture and fixtures 7 - 15 Computer hardware, software and software development costs 3 - 10 Leasehold improvements 1 - 7 45 Impairment of long-lived assets Long-lived assets, such as property, equipment and software and acquired intangibles subject to amortization, are reviewed for impairment annually, or whenever events or changes in circumstances indicate that the remaining estimated useful life may warrant revision or that the carrying amount of an asset may not be recoverable. Some of the events or changes in circumstances that would trigger an impairment review include, but are not limited to, significant under-performance relative to expected and/or historical results, significant negative industry or economic trends, or knowledge of transactions involving the sale of similar property at amounts below the carrying value. Assets are grouped for measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows expected to be generated by the asset group, then an impairment charge is recognized to the extent the carrying amount exceeds the asset group’s fair value. In determining fair value, management considers current results, trends, future prospects, and other economic factors. Leases The Company leases office facilities and equipment under operating leases. We determine whether an arrangement is or contains a lease at inception. For all leases with a term greater than 12 months, we record our operating lease liabilities and right-of-use (ROU) assets at the lease commencement date. Operating lease liabilities are based on the present value of future minimum lease payments over the lease term, and include options to renew a lease in the future minimum lease payments if it is reasonably certain that the Company will exercise that option. ROU assets are based on the lease liability, adjusted for any lease prepayments and lease incentives. If a lease does not provide an implicit interest rate, we use our incremental borrowing rate on a collateralized basis from the information available at commencement date in determining the present value of lease payments. We recognize expense for lease payments on a straight-line basis over the lease term for operating leases. Leases with initial terms of 12 months or less are considered short-term lease costs and are not recorded as ROU assets on the consolidated balance sheets. ROU assets are reviewed for impairment in the same manner as long-lived assets. No impairment has been recorded in the periods presented. The Company has elected the practical expedient not to separate non-lease components from lease components for all classes of assets. Our lease agreements generally do not contain material variable lease payments or restrictive covenants. Workers’ compensation costs For all claims incurred under the Company’s self-insured workers’ compensation programs, we record an estimate for the total amount of workers’ compensation costs, which represents the amount necessary to pay claims and related expenses associated with workplace injuries that have occurred under the self-insured program. In addition to our self-insured program, the Company provides workers' compensation coverage through a fully insured arrangement. The Company's fully insured policies allow for return premiums if claims develop favorably, ranging from $ 20.0 million to $ 30.0 million depending on the policy period. For the policy period beginning July 1, 2021, BBSI can incur additional premiums up to $ 7.5 million if claims develop adversely. For all other policy years, no additional premiums can be charged based on claim performance. Our estimate of the losses associated with workers’ compensation claims directly impacts our estimate of the return premiums we may realize or the additional premiums that we may incur. When a claim involving a probable loss is reported, our independent third-party administrator for workers’ compensation claims (“TPA”) establishes a case reserve for the estimated amount of ultimate loss. The estimate reflects a judgment based on established case reserving practices and the experience and knowledge of the TPA regarding the nature and expected amount of the claim, as well as the estimated expenses of settling the claim, including legal and other fees and expenses of claims administration. The 46 adequacy of such case reserves depends in part on the professional judgment of the TPA to evaluate the economic consequences of each claim properly and comprehensively. Our estimate of ultimate losses includes an additional component for potential future increases in the cost to finally resolve open injury claims and claims incurred in prior periods but not reported (together, "IBNR") based on actuarial estimates provided by the Company’s independent actuary. IBNR does not apply to a specific claim but rather applies to the entire population of claims arising from a specific time period. IBNR primarily covers costs relating to: • Future claim payments in excess of case reserves on recorded open claims; • Additional claim payments on closed claims; and • Claims that have occurred but have not yet been reported to us. The process of estimating claims and claims adjustment expense involves a high degree of judgment and is affected by both internal and external events, including changes in claims handling practices, modifications in reserve estimation procedures, changes in individuals involved in the reserve estimation process, inflation, trends in the litigation and settlement of pending claims, and legislative changes. Our estimates are based on actuarial analyses and informed judgment, derived from individual experience and expertise applied to multiple sets of data and analyses. We consider significant facts and circumstances known both at the time that loss reserves are initially established and as new facts and circumstances become known. Due to the inherent uncertainty underlying loss estimates, the ultimate expense incurred will likely vary from the related loss estimate at the reporting date. Therefore, as specific claims are paid out in the future, actual paid losses may be materially different from our current loss estimates. A basic premise in most actuarial analyses is that historical data and past patterns demonstrated in the incurred and paid historical data form a reasonable basis upon which to project future outcomes, absent a material change. Significant structural changes to the available data can materially impact the estimation process. To the extent a material change affecting the ultimate claim amount becomes known, such change is quantified to the extent possible through an analysis of internal company data and, if available and when appropriate, external data. Actuaries exercise a considerable degree of judgment in the evaluation of these factors and the need for such actuarial judgment is more pronounced when faced with material uncertainties. Customer deposits We require deposits from certain PEO and staffing customers to cover a portion of our accounts receivable due from such customers in the event of default of payment. Comprehensive income (loss) Comprehensive income (loss) includes all changes in equity during a period except those that resulted from transactions with the Company's stockholders. Other comprehensive income (loss) comprises unrealized holding gains and losses on our available-for-sale investments, net of tax. Statements of cash flows Interest paid in 2025, 2024 and 2023 did not materially differ from interest expense. Income taxes paid, net of income tax refunds received by the Company, totaled $ 15.4 million during 2025 , comprised of $ 12.5 million in federal tax and $ 2.9 million in state tax, of which $ 2.3 million was paid to California. Income taxes paid net of income tax refunds received by the Company totaled $ 13.7 million during 2024 , comprised of $ 13.1 million in federal tax and $ 0.6 million in state tax. No individual state made up more than 5 % of income taxes paid net of income tax refunds received by the Company during 2024 . Income 47 taxes paid net of income tax refunds received by the Company totaled $ 22.2 million in 2023 , comprised of $ 16.6 million in federal tax and $ 5.6 million in state tax, of which $ 4.0 million was paid to California. Bank deposits and other cash equivalents that are restricted for use are classified as restricted cash. The table below reconciles the cash, cash equivalents and restricted cash balances from our consolidated balance sheets to the amounts reported on the consolidated statements of cash flows (in thousands): December 31, December 31, December 31, 2025 2024 2023 Cash and cash equivalents $ 95,033 $ 55,367 $ 71,168 Restricted cash, included in restricted cash and investments 31,301 27,221 3,673 Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 126,334 $ 82,588 $ 74,841 Basic and diluted earnings per share Basic earnings per share are computed based on the weighted average number of common shares outstanding for each year using the treasury method. Diluted earnings per share reflect the potential effects of the issuance of shares in connection with the exercise of outstanding stock options, vesting of outstanding restricted stock units and performance share units, and the Company’s employee stock purchase plan. Basic and diluted shares outstanding are summarized as follows (in thousands): Year Ended December 31, 2025 2024 2023 Weighted average number of basic shares outstanding 25,613 26,076 26,921 Effect of dilutive securities 528 632 473 Weighted average number of diluted shares outstanding 26,141 26,708 27,394 Accounting estimates The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are used for fair value measurement of investments, allowance for expected credit losses, deferred income taxes, carrying values for goodwill and property, equipment and software, and accrued workers' compensation liabilities. Actual results may or may not differ from such estimates. Recent accounting pronouncements The following Accounting Standards Updates (ASUs) have been recently issued by the Financial Accounting Standards Board (FASB). ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU applies to all entities subject to income taxes. The new requirements are effective for annual periods beginning after December 15, 2024. We have adopted this ASU on a retrospective basis for the annual reporting period of our fiscal year beginning January 1, 2025, with no material effects on the Company’s financial condition, results of operations, or cash flows. 48 ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“DISE”) In November 2024, the FASB iss ued ASU 2024-03, which requires disclosure of specified information about certain costs and expenses in the notes to interim and annual financial statements. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. We are evaluating the impact of this new accounting standard on the Company's consolidated financial statements and related disclosures. We do not expect that the adoption of this ASU will have a material effect on the Company’s financial condition, results of operations, or cash flows. ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software In September 2025, the FASB issued ASU 2025-06, which amends the capitalization criteria of software development costs. The ASU eliminates the prior project-stage model and implements a probable-to-complete recognition threshold. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in this ASU should be applied using either a prospective transition approach, modified transition approach, or retrospective transition approach. We are evaluating the impact of this new accounting standard on the Company's consolidated financial statements and related disclosures. We do not expect that the adoption of this ASU will have a material effect on the Company’s financial condition, results of operations, or cash flows. 49 Note 2 - Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All of our financial instruments are recognized in our consolidated balance sheets. Carrying values approximate fair value of most financial assets and liabilities. Investments and restricted cash and investments are recorded at market value. The interest rates on our investments approximate current market rates for these types of investments. In determining the fair value of our financial assets, the Company predominantly uses the market approach. In determining the fair value of all its corporate bonds, mortgage-backed securities, U.S. treasuries, U.S. government agency securities, mutual funds, money market funds, asset-backed securities, and emerging markets, the Company utilizes non-binding quotes provided by our investment brokers. Factors used in determining the fair value of our financial assets and liabilities are summarized into three levels as established in the fair value hierarchy framework. The three levels of the fair value hierarchy are described below. Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 – Inputs to the valuation methodology include: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. In determining the fair value measurement of our financial assets, the fair value measurement level within the hierarchy is based on the lowest level input and is applied to each financial asset. Valuation techniques are used to maximize the use of observable inputs and minimize the use of unobservable inputs. 50 The following table summarizes the Company’s investments at December 31, 2025 and 2024 measured at fair value on a recurring basis (in thousands): December 31, 2025 December 31, 2024 Gross Gross Gross Gross Unrealized Unrealized Recorded Unrealized Unrealized Recorded Cost Gains Losses Basis Cost Gains Losses Basis Current: Cash equivalents: Money market funds $ 44,394 $ — $ — $ 44,394 $ 26,661 $ — $ — $ 26,661 Total cash equivalents 44,394 — — 44,394 26,661 — — 26,661 Investments: Corporate bonds 27,827 5 ( 1,238 ) 26,594 27,954 3 ( 2,365 ) 25,592 U.S. treasuries 14,261 — ( 634 ) 13,627 12,460 — ( 1,140 ) 11,320 Mortgage-backed securities 11,174 — ( 2,026 ) 9,148 12,128 — ( 2,592 ) 9,536 Asset-backed securities 7,564 17 ( 63 ) 7,518 7,610 12 ( 109 ) 7,513 U.S. government agency securities 5,309 — ( 42 ) 5,267 12,734 — ( 203 ) 12,531 Total current investments 66,135 22 ( 4,003 ) 62,154 72,886 15 ( 6,409 ) 66,492 Restricted cash and investments (1) : Corporate bonds 79,178 8 ( 3,876 ) 75,310 100,030 16 ( 7,302 ) 92,744 U.S. treasuries 51,809 — ( 3,767 ) 48,042 54,900 — ( 6,348 ) 48,552 Mortgage-backed securities 32,560 10 ( 4,000 ) 28,570 40,858 10 ( 5,674 ) 35,194 Mutual funds 13,602 — — 13,602 10,961 — — 10,961 U.S. government agency securities 5,947 — ( 336 ) 5,611 16,785 — ( 914 ) 15,871 Asset-backed securities 980 11 — 991 1,666 6 ( 1 ) 1,671 Money market funds 486 — — 486 216 — — 216 Emerging markets — — — — 200 1 — 201 Total restricted cash and investments 184,562 29 ( 11,979 ) 172,612 225,616 33 ( 20,239 ) 205,410 Total investments $ 295,091 $ 51 $ ( 15,982 ) $ 279,160 $ 325,163 $ 48 $ ( 26,648 ) $ 298,563 (1) Included in restricted cash and investments within the consolidated balance sheets as of December 31, 2025 and 2024 is restricted cash of $ 30.8 million and $ 26.7 million, respectively, which is excluded from the table above. Restricted cash and investments are classified as current and noncurrent on the balance sheet based on the nature of the restriction. 51 The following table summarizes the Company's investments at December 31, 2025 and 2024 measured at fair value on a recurring basis by fair value hierarchy level (in thousands): December 31, 2025 December 31, 2024 Total Total Recorded Recorded Basis Level 1 Level 2 Level 3 Other (1) Basis Level 1 Level 2 Level 3 Other (1) Cash equivalents: Money market funds $ 44,394 $ — $ — $ — $ 44,394 $ 26,661 $ — $ — $ — $ 26,661 Investments: — Corporate bonds 26,594 — 26,594 — — 25,592 — 25,592 — — U.S. treasuries 13,627 — 13,627 — — 11,320 — 11,320 — — Mortgage-backed securities 9,148 — 9,148 — — 9,536 — 9,536 — — Asset-backed securities 7,518 — 7,518 — — 7,513 — 7,513 — — U.S. government agency securities 5,267 — 5,267 — — 12,531 — 12,531 — — Restricted cash and investments: Corporate bonds 75,310 — 75,310 — — 92,744 — 92,744 — — U.S. treasuries 48,042 — 48,042 — — 48,552 — 48,552 — — Mortgage-backed securities 28,570 — 28,570 — — 35,194 — 35,194 — — Mutual funds 13,602 13,602 — — — 10,961 10,961 — — — U.S. government agency securities 5,611 — 5,611 — — 15,871 — 15,871 — — Asset-backed securities 991 — 991 — — 1,671 — 1,671 — — Money market funds 486 — — — 486 216 — — — 216 Emerging markets — — — — — 201 — 201 — — Total investments $ 279,160 $ 13,602 $ 220,678 $ — $ 44,880 $ 298,563 $ 10,961 $ 260,725 $ — $ 26,877 (1) Investments in money market funds measured at fair value using the net asset value per share practical expedient are not subject to hierarchy level classification disclosure. The Company invests in money market funds that seek to maintain a stable net asset value. These investments include commingled funds that comprise high-quality short-term securities representing liquid debt and monetary instruments where the redemption value is likely to be the fair value. Redemption is permitted daily without written notice. 52 The following table summarizes the contractual maturities of the Company’s available for sale securities at December 31, 2025 and 2024. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties. The table also includes money market funds, which are classified as cash and cash equivalents on the Company’s consolidated balance sheets. December 31, 2025 (In thousands) Less than 1 Year Between 1 to 5 Years Between 5 to 10 Years After 10 Years Total Corporate bonds $ 11,486 $ 85,088 $ 5,330 $ — $ 101,904 U.S. treasuries 3,237 49,405 9,027 — 61,669 Money market funds 44,880 — — — 44,880 U.S. government agency securities 2,096 8,782 — — 10,878 Asset-backed securities — 578 151 7,780 8,509 Total $ 61,699 $ 143,853 $ 14,508 $ 7,780 $ 227,840 December 31, 2024 (In thousands) Less than 1 Year Between 1 to 5 Years Between 5 to 10 Years After 10 Years Total Corporate bonds $ 18,815 $ 76,574 $ 22,947 $ — $ 118,336 U.S. treasuries 497 42,333 17,042 — 59,872 U.S. government agency securities 8,014 19,333 1,055 — 28,402 Money market funds 26,877 — — — 26,877 Asset-backed securities — 1,228 6,654 1,302 9,184 Emerging markets — — 201 — 201 Total $ 54,203 $ 139,468 $ 47,899 $ 1,302 $ 242,872 The average contractual maturity of mortgage-backed securities, which are excluded from the table above , was 20 years and 21 years as of December 31, 2025 and 2024 , respectively. 53 The fair values and gross unrealized losses of the Company’s available for sale securities that were in an unrealized loss position as of December 31, 2025 and 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position, were as follows (in thousands): December 31, 2025 Less than 12 months 12 months or longer Total Gross Gross Gross Recorded Unrealized Recorded Unrealized Recorded Unrealized Basis Losses Basis Losses Basis Losses Investments: Corporate bonds $ — $ — $ 26,394 $ ( 1,238 ) $ 26,394 $ ( 1,238 ) U.S. treasuries — — 13,627 ( 634 ) 13,627 ( 634 ) Mortgage-backed securities — — 9,148 ( 2,026 ) 9,148 ( 2,026 ) U.S. government agency securities — — 5,267 ( 42 ) 5,267 ( 42 ) Asset-backed securities — — 1,302 ( 63 ) 1,302 ( 63 ) Total investments — — 55,738 ( 4,003 ) 55,738 ( 4,003 ) Restricted investments: Corporate bonds 100 — 73,745 ( 3,876 ) 73,845 ( 3,876 ) U.S. treasuries 729 ( 1 ) 47,313 ( 3,766 ) 48,042 ( 3,767 ) Mortgage-backed securities — — 26,916 ( 4,000 ) 26,916 ( 4,000 ) U.S. government agency securities — — 5,611 ( 336 ) 5,611 ( 336 ) Total restricted investments 829 ( 1 ) 153,585 ( 11,978 ) 154,414 ( 11,979 ) Total investments and restricted investments $ 829 $ ( 1 ) $ 209,323 $ ( 15,981 ) $ 210,152 $ ( 15,982 ) December 31, 2024 Less than 12 months 12 months or longer Total Gross Gross Gross Recorded Unrealized Recorded Unrealized Recorded Unrealized Basis Losses Basis Losses Basis Losses Investments: Corporate bonds $ 20 $ — $ 25,377 $ ( 2,365 ) $ 25,397 $ ( 2,365 ) U.S. government agency securities — — 12,531 ( 203 ) 12,531 ( 203 ) U.S. treasuries — — 11,320 ( 1,140 ) 11,320 ( 1,140 ) Mortgage-backed securities — — 9,536 ( 2,592 ) 9,536 ( 2,592 ) Asset-backed securities — — 1,301 ( 109 ) 1,301 ( 109 ) Total investments 20 — 60,065 ( 6,409 ) 60,085 ( 6,409 ) Restricted investments: Corporate bonds 11,142 ( 15 ) 71,716 ( 7,287 ) 82,858 ( 7,302 ) U.S. treasuries 1,399 ( 29 ) 46,656 ( 6,319 ) 48,055 ( 6,348 ) Mortgage-backed securities 3,360 ( 37 ) 29,877 ( 5,637 ) 33,237 ( 5,674 ) U.S. government agency securities — — 15,871 ( 914 ) 15,871 ( 914 ) Asset-backed securities 443 ( 1 ) — — 443 ( 1 ) Total restricted investments 16,344 ( 82 ) 164,120 ( 20,157 ) 180,464 ( 20,239 ) Total investments and restricted investments $ 16,364 $ ( 82 ) $ 224,185 $ ( 26,566 ) $ 240,549 $ ( 26,648 ) We have determined that the gross unrealized losses on our investments as of December 31, 2025 and 2024 were temporary in nature. The decline in fair value was due to changes in market interest rates, rather than credit losses. 54 Note 3 - Property, Equipment and Software Property, equipment and software consists of the following (in thousands): December 31, 2025 2024 Buildings $ 18,435 $ 17,929 Equipment, furniture and fixtures 24,149 24,244 Computer hardware and software 6,363 6,233 Software development costs 62,981 47,025 111,928 95,431 Less accumulated depreciation and amortization ( 46,188 ) ( 40,140 ) 65,740 55,291 Land 1,490 1,490 Total Property, Equipment and Software $ 67,230 $ 56,781 We recognized $ 3.6 million, $ 3.7 million and $ 3.6 million in depreciation expense associated with our property and equipment in 2025, 2024 and 2023, respectively. We recognized $ 4.6 million, $ 3.9 million, and $ 3.5 million in amortization of capitalized software development costs in 2025, 2024 and 2023, respectively. We capitalize d $ 16.0 million, $ 12.4 million and $ 6.0 million of software development costs in 2025, 2024 and 2023 , respectively. Note 4 - Workers' Compensation Claims Liabilities The following table summarizes the aggregate workers' compensation reserve activity (in thousands): Years Ended December 31, 2025 2024 2023 Beginning balance Workers' compensation claims liabilities $ 128,446 $ 167,763 $ 215,987 Add: claims expense accrual Current period 12,781 12,188 16,731 Prior periods ( 8,141 ) ( 11,524 ) ( 12,147 ) Total claims expense incurred 4,640 664 4,584 Less: claim payments related to Current period 5,980 5,006 3,260 Prior periods 22,218 35,008 52,570 Total claim payments 28,198 40,014 55,830 Change in claims incurred in excess of retention limits 3,696 33 3,022 Ending balance Workers' compensation claims liabilities $ 108,584 $ 128,446 $ 167,763 Insured program The Company provides workers’ compensation coverage for client employees primarily through arrangements with fully licensed, third-party insurers (the “insured program”). Under this program, carriers issue policies or afford coverage to the Company’s clients under a program maintained by the Company. Approximately 86 % of the Company’s workers’ compensation exposure is covered through the insured program. The Company maintains a fully insured arrangement for its insured program, whereby third-party insurers assume substantially all risk of loss for claims incurred under the program. This fully insured arrangement covers claims incurred between July 1, 2021 and June 30, 2026. The Company’s fully insured policies allow for return premiums if claims develop favorably, ranging from $ 20.0 million to $ 30.0 million, depending on the policy period. For the policy period beginning July 1, 2021, BBSI can incur additional premiums up to $ 7.5 million if claims develop adversely. For all other policy years, no additional premiums can be charged based on claim performance. 55 Premiums incurred but not paid are recorded as either current or long-term premium payable on the consolidated balance sheets based on the expected timing of the payments. For claims incurred under the insured program prior to July 1, 2021, the Company retains risk of loss up to the first $ 3.0 million per occurrence on policies issued after June 30, 2020 and $ 5.0 million per occurrence on policies issued before that date. Claim obligations for policies issued under the insured program between February 1, 2014 and June 30, 2018 were removed through loss portfolio transfers in 2020 and 2021. The following is a summary of the risk retained by the Company under its insured program after considering the effects of the loss portfolio transfers and current insurance arrangements: Year Claims risk retained 2016 No 2017 No 2018 No 2019 Yes 2020 Yes 2021 - Through June 30 Yes 2021 - July 1 and after No 2022 No 2023 No 2024 No 2025 No The Company is required to maintain minimum collateral levels for certain policies issued under the insured program, which is held in a trust account (the “trust account”). The balance in the trust account was $ 175.3 million an d $ 197.1 million at December 31, 2025 and December 31, 2024, respectively. The trust account balance is included as a component of the current and long-term restricted cash and investments in the Company’s consolidated balance sheets. Self-insured programs The Company is a self-insured employer with respect to workers' compensation coverage for all employees, including employees of PEO clients that elect to participate in our workers’ compensation program, working in Colorado, Maryland, Ohio, and Oregon. In the state of Washington, state law allows only the Company's staffing services and internal management employees to be covered under the Company's self-insured workers' compensation program. The Company also operates a wholly owned, fully licensed insurance company, Ecole, which provides workers’ compensation coverage to client employees working in Arizona and Utah. Approximately 14 % of the Company’s workers’ compensation exposure is covered through self-insurance or Ecole (the “self-insured programs”). For all claims incurred under the Company’s self-insured programs, the Company retains risk of loss up to the first $ 3.0 million per occurrence, except in Maryland and Colorado, where the Company’s retention per occurrence is $ 1.0 million and $ 2.0 million, respectively. For claims incurred under the Company’s self-insured programs prior to July 1, 2020, the Company retains risk of loss up to the first $ 5.0 million per occurrence, except in Maryland and Colorado, where the retention per occurrence is $ 1.0 million and $ 2.0 million, respectively. The states of Maryland, California, Oregon, Colorado, Washington, and Delaware required the Company to maintain collateral totaling $ 52.1 million and $ 55.9 million at December 31, 2025 and 2024, respectively, to cover potential workers’ compensation claims losses related to the Company’s current and former status as a self-insured employer. At December 31, 2025 , the Company provided surety bonds totaling $ 52.1 million. 56 Claims liabilities The Company provided a total of $ 108.6 million and $ 128.4 million at December 31, 2025 and 2024 , respectively, as the estimated future liability for unsettled workers' compensation claims liabilities. Of this amount, $ 9.7 million and $ 6.0 million at December 31, 2025 and 2024 respectively, represent case reserves and IBNR in excess of the Company’s retention. The accrual for costs incurred in excess of retention is offset by a receivable from insurance carriers of $ 9.7 million and $ 6.0 million at December 31, 2025 and 2024 respectively, which is included in other assets in the consolidated balance sheets. Note 5 - Revolving Credit Facility The Company maintains an agreement (the “Agreement”) with Wells Fargo Bank, N.A. (the "Bank") for a revolving credit line of $ 50.0 million and a sublimit for standby letters of credit of $ 25.0 million. Advances under the revolving credit line bear interest, as selected by the Company, of (a) the daily Simple Secured Overnight Financing Rate ("SOFR") plus 1.75 % or (b) one-month Term SOFR plus 1.75 %. The Agreement also provides for an unused commitment fee of 0.30 % per year on the average daily unused amount of the revolving credit line, as well as a fee of 1.75 % of the face amount of each letter of credit reserved under the line of credit. The Company had no outstanding borrowings on its revolving credit line at December 31, 2025 and 2024 . The credit facility is collateralized by the Company’s accounts receivable and other rights to receive payment. The revolving credit facility will mature on August 1, 2028 , unless extended. The Agreement requires the satisfaction of certain financial covenants as follows: • adjusted free cash flow [net profit after taxes plus interest expense (net of capitalized interest), depreciation, expense and amortization expense, less dividends/distributions] not less than $ 10 million as of each fiscal quarter end, determined on a rolling 4-quarter basis; and • tangible net worth [aggregate of total stockholders' equity plus subordinated debt less any intangible assets and less any loans or advances to, or investments in, any related entities or individuals] not less than $ 50 million at each fiscal quarter end. The Agreement imposes certain additional restrictions unless the Bank provides its prior written consent as follows: • incurring additional indebtedness is prohibited, other than purchase financing for the acquisition of assets, provided that the aggregate of all purchase financing does not exceed $ 1 million at any time; • the Company may not terminate or cancel any of the AICE policies; and • if an event of default occurs, and is continuing, including on a pro forma basis, no dividends or distributions would be permitted to be paid and redemptions and repurchases of the Company’s stock would be permitted only up to $ 15 million in any rolling 12-month period. The Agreement also contains customary events of default and specified cross-defaults under the Company's workers' compensation insurance arrangements. If an event of default under the Agreement occurs and is continuing, the Bank may declare any outstanding obligations under the Agreement to be immediately due and payable. At December 31, 2025 , the Company was in compliance with all covenants. 57 Note 6 - Benefit Plans We have a 401(k) Retirement Savings Plan for the benefit of our eligible employees. Employees covered under a PEO arrangement may participate in the plan at the discretion of the PEO client. We make matching contributions to the 401(k) plan under a safe harbor provision. The determination of any discretionary Company contributions to the plan is at the sole discretion of our Board of Directors. No discretionary Company contributions were made to the plan for the years ended December 31, 2025, 2024 or 2023. We made matching contributions of $ 2.8 million , $ 2.6 million and $ 2.4 million in 2025, 2024 and 2023, respectively. The Company allows certain highly compensated employees of the Company to defer compensation under a nonqualified deferred compensation plan. The long-term portion of the deferred compensation plan liability was $ 11.9 million and $ 9.5 million at December 31, 2025 and 2024, respectively, and is recorded in customer deposits and other long-term liabilities on the consolidated balance sheets. The current portion of the deferred compensation plan liability was $ 1.7 million and $ 1.5 million at December 31, 2025 and 2024, respectively, and is recorded in other accrued liabilities on the consolidated balance sheets. The fair value of the long-term asset portion of this plan was $ 11.9 million and $ 9.5 million at D ecember 31, 2025 and 2024, respectively, and is recorded in noncurrent restricted cash and investments on the consolidated balance sheets. The fair value of the current asset portion of this plan was $ 1.7 million and $ 1.5 million at December 31, 2025 and 2024 , respectively, and is recorded in current restricted cash and investments on the consolidated balance sheets. Note 7 - Leases The Company primarily leases office buildings under operating leases which are included in Operating lease right-of-use (“ROU”) assets, Current operating lease liabilities, and Long-term operating lease liabilities on the consolidated balance sheets. The Company’s leases have remaining terms of 1 to 8 years. Information related to the Company's total lease costs was as follows (in thousands): Year Ended December 31, 2025 December 31, 2024 Operating lease cost $ 8,094 $ 7,556 Variable lease cost 1,343 1,314 Short-term lease cost 417 662 Total lease cost $ 9,854 $ 9,532 Information related to the Company's ROU assets and related lease liabilities was as follows (in thousands): Year Ended December 31, 2025 December 31, 2024 Cash paid for operating lease liabilities $ 7,663 $ 7,745 Right-of-use assets obtained in exchange for new operating lease obligations 7,210 6,913 December 31, 2025 December 31, 2024 Weighted-average remaining lease term 4.2 years 3.7 years Weighted-average discount rate 5.4 % 5.1 % 58 The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancellable operating leases with terms of more than one year to the total operating lease liabilities recognized on the consolidated balance sheets as of December 31, 2025 (in thousands): 2026 $ 7,999 2027 6,884 2028 5,252 2029 3,148 2030 2,011 Thereafter 2,060 Total undiscounted future minimum lease payments 27,354 Less: Difference between undiscounted lease payments and discounted operating lease liabilities 2,901 Total operating lease liabilities $ 24,453 Current operating lease liabilities $ 6,969 Long-term operating lease liabilities 17,484 Total operating lease liabilities $ 24,453 The Company has no additional operating leases that have not commenced as of December 31, 2025 . Note 8 - Income Taxes The provision for income taxes is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Current provision for income taxes Federal $ 12,014 $ 15,070 $ 11,896 State 3,445 3,613 1,854 Total current provision for income taxes 15,459 18,683 13,750 Deferred provision for income taxes Federal 1,627 ( 535 ) 2,784 State ( 135 ) ( 319 ) 1,842 Total deferred provision for income taxes 1,492 ( 854 ) 4,626 Provision for income taxes Federal 13,641 14,535 14,680 State 3,310 3,294 3,696 Total provision for income taxes $ 16,951 $ 17,829 $ 18,376 59 Deferred income tax assets and liabilities consist of the following components (in thousands): December 31, 2025 2024 Deferred income tax assets: Deferred compensation $ 7,605 $ 7,392 Workers' compensation claims liabilities 6,930 5,423 Operating lease liability 6,670 5,850 Tax effect of unrealized losses, net 4,464 7,374 Equity based compensation 832 857 Other 752 1,164 Total deferred income tax assets 27,253 28,060 Less: valuation allowance 344 340 Net deferred income tax assets 26,909 27,720 Deferred income tax liabilities: Tax depreciation in excess of book depreciation ( 12,132 ) ( 10,230 ) Amortization of software and intangibles ( 8,370 ) ( 7,467 ) Operating lease right-of-use ( 6,333 ) ( 5,545 ) Other — ( 1 ) Total deferred income tax liabilities ( 26,835 ) ( 23,243 ) Net deferred income taxes $ 74 $ 4,477 The effective tax rate differed from the U.S. statutory federal tax rate due to the following: Year Ended December 31, 2025 2024 2023 Statutory federal tax rate $ 14,994 21.0 % $ 14,873 21.0 % $ 14,488 21.0 % State and local income taxes, net of federal income tax effect (1) 2,615 3.7 2,579 3.6 3,016 4.4 Tax credits ( 1,445 ) ( 2.0 ) ( 305 ) ( 0.4 ) ( 561 ) ( 0.8 ) Nontaxable or nondeductible items 673 0.9 828 1.2 1,140 1.7 Nondeductible Officers' Compensation (162(m)) 1,279 1.8 953 1.3 1,028 1.5 Equity-based compensation windfall tax difference ( 991 ) ( 1.4 ) ( 712 ) ( 1.0 ) ( 252 ) ( 0.4 ) Other nondeductible expenses (no item >5%) 385 0.5 587 0.8 364 0.5 Changes in unrecognized tax benefits 380 0.5 ( 293 ) ( 0.4 ) 132 0.2 Changes in valuation allowances 3 0.0 211 0.3 55 0.0 Other, net ( 269 ) ( 0.4 ) ( 64 ) ( 0.1 ) 106 0.1 Effective tax rate $ 16,951 23.7 % $ 17,829 25.2 % $ 18,376 26.6 % (1) State taxes in California made up the majority (greater than 50 percent) of the tax effect in this category in all years reported. On July 4, 2025, the One Big Beautiful Bill Act was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. This new legislation does not have a material impact on the Company's results of operations. Under ASC 740, “Income Taxes,” management evaluates the realizability of the deferred tax assets on a quarterly basis under a “more-likely-than-not” standard. As part of this evaluation, management reviews all evidence both positive and negative to determine if a valuation allowance is needed. One component of this analysis is to determine whether the Company was in a cumulative loss position for the most recent 12 quarters. The Company was in a cumulative income position for the 12 quarters ended December 31, 2025. At December 31, 2025 and December 31, 2024, the Company had not recorded a valuation allowance against its deferred tax assets. 60 The Company is subject to income taxes in U.S. federal and multiple state and local tax jurisdictions. The Internal Revenue Service (the "IRS") is examining the Company’s federal tax returns for the years ended December 31, 2017 through 2021 . BBSI received notices that the IRS intends to disallow certain wage-based tax credits claimed for the years 2017 through 2021 , which could result in estimated total additional taxes of $ 8.0 million and penalties and interest of $ 5.2 million. The Company disagrees with the IRS determination to disallow certain wage-based credits taken by the Company and has filed U.S. Tax Court petitions challenging these notices. We believe that the Company has the technical merits to defend its position. Based on management’s more-likely-than-not assessment that the Company’s position is sustainable, no reserve for the aforementioned IRS notices of disallowance of wage-based tax credits or underpayment penalties has been recorded in the financial statements. In the major jurisdictions where it operates, the Company is generally no longer subject to income tax examinations by tax authorities for tax years before 2017. As of December 31, 2025, total gross unrecognized tax benefits, excluding interest and penalties, of $ 0.8 million would affect the Company's effective tax rate if recognized in future periods. The Company had unrecognized tax benefit of $ 0.5 million and $ 0.8 million as of December 31, 2024 and December 31, 2023, respectively. A portion of the consolidated income the Company generates is not subject to state income tax. Depending on the percentage of this income as compared to total consolidated income, the Company's state effective tax rate could fluctuate from expectations. At December 31, 2025, the Company had no state or federal operating loss carryforwards or tax credit carryforwards. Note 9 - Stock Incentive Plans The Company's 2020 Stock Incentive Plan (the "2020 Plan"), which provides for share-based awards to Company employees, non-employee directors and outside consultants or advisors, was approved by stockholders on May 27, 2020, and amended with stockholder approval on June 5, 2023, to increase the number of shares available for issuance under the 2020 Plan from 1,500,000 to 2,900,000 . The number of shares available for grants of awards at December 31, 2025 was 592,654 . Share-based compensation expense included in selling, general and administrative expenses during the years ended December 31, 2025, 2024 and 2023, was $ 10.4 million, $ 8.8 million and $ 8.5 million, respectively. Related income tax benefits for the years ended December 31, 2025, 2024 and 2023, were $ 2.6 million, $ 2.2 million and $ 1.6 million, respectively. Stock Options Outstanding stock options generally vest over four or eight years and expire up to ten years after the date of grant. A summary of the status of the Company’s stock options at December 31, 2025, together with changes during the periods then ended, is presented below: Weighted Weighted Average Aggregate Average Remaining Intrinsic Number Exercise Contractual Value of Options Price Term (Years) (In Thousands) Outstanding at December 31, 2024 414,000 $ 20.60 — — Options exercised ( 131,500 ) 15.74 — — Outstanding at December 31, 2025 282,500 22.87 2.50 4,030 Exercisable at December 31, 2025 88,000 $ 18.88 2.03 $ 1,525 61 The fair value of stock option awards as determined under the Black-Scholes option-pricing model was estimated with the following weighted-average assumptions: 2024 Expected volatility 24.4 % Risk free interest rate 4.2 % Expected dividend yield 0.7 % Expected term (years) 5.0 Weighted average fair value per share $ 12.16 No stock options were granted during the years ended December 31, 2025 or 2023. The weighted average fair value of stock options granted for the year ended December 31, 2024 was $ 12.16 . There were no stock options granted with an exercise price below market price during 2024. The intrinsic value of stock options exercised for the years ended December 31, 2025, 2024 and 2023 was $ 4.0 million , $ 0.6 million, and $ 0.1 million, respectively. The fair value of stock options vested for the years ended December 31, 2024 was $ 728,000 . No stock options vested during the years ended December 31, 2025 or 2023. As of December 31, 2025 , unrecognized compensation expense related to stock options was $ 0.5 million with a weighted average remaining amortization period of 1.9 years. Restricted Stock Units Restricted stock units generally vest in four equal annual installments beginning one year following the date of grant, other than restricted stock units granted to nonemployee directors, which vest one year following the date of grant. The following table presents restricted stock unit activity: Weighted Average Grant Date Units Fair Value Nonvested at December 31, 2024 760,857 $ 24.10 Granted 213,033 42.02 Vested ( 294,173 ) 22.35 Cancelled/Forfeited ( 46,737 ) 24.95 Nonvested at December 31, 2025 632,980 $ 30.88 The total fair value of restricted stock units vested during the years ended December 31, 2025, 2024 and 2023 was $ 6.6 million , $ 6.3 million and $ 5.1 million, respectively. As of December 31, 2025 , unrecognized compensation expense related to restricted stock units was $ 14.9 million with a weighted average remaining amortization period of 2.7 years. Performance Share Units Performance share units (“PSUs”) are granted to key employees of the Company and are conditioned on attaining financial performance metrics specified in each award. Each award is subject to upward or downward adjustment depending on whether achievement of the financial metrics is above or below the target level, with a maximum payout of up to 200 % of the target number of shares covered by the award. PSUs vest on the date that the Compensation Committee determines the level of attainment of the specified financial metrics, generally measured over a three-year period. 62 The following table presents PSU activity: Weighted Average Grant Date Units Fair Value Nonvested at December 31, 2024 265,748 $ 22.01 Granted 103,576 34.32 Vested ( 118,020 ) 15.04 Nonvested at December 31, 2025 251,304 $ 30.36 The total grant date fair value of PSUs vested during the years ended December 31, 2025, 2024 and 2023 was $ 1.8 million, $ 1.7 million, and $ 1.6 million, respectively. Employee Stock Purchase Plan The Company offers employees the right to purchase shares at a discount from the market price under the Company’s 2019 Employee Stock Purchase Plan. Subject to the annual statutory limit, employees are eligible to participate through payroll deductions of up to 15 % of their compensation. At the end of each six-month offering period, shares are purchased by the participants at 85 % of the fair market value at the end of the offering period. As of December 31, 2025 , approximately 993,278 shares were reserved for future issuance under the 2019 Employee Stock Purchase Plan. Note 10 - Stock Repurchase Program The Company maintains a stock repurchase program approved by the Board of Directors, which authorizes the repurchase of shares from time to time in open market purchases. On August 4, 2025, the Board of Directors authorized the repurchase of up to $ 100.0 million of the Company’s common stock over a two-year period beginning August 4, 2025 . The new repurchase program replaces the program approved in July 2023 . The Company repurchased 1,035,638 , 848,958 and 1,500,456 shares at an aggregate purchase price of $ 42.0 million, $ 29.1 million and $ 34.2 million during 2025, 2024 and 2023, respectively. In addition, shares of restricted stock units withheld to satisfy tax-withholding obligations from the vesting of restricted stock units were 144,463 , 153,372 and 131,552 in 2025, 2024 and 2023, respectively, which are not subject to the current repurchase pr ogram. See “Note 5. Revolving Credit Facility” for related restrictions on share repurchases. Note 11 - Litigation On April 5, 2011, several individual plaintiffs filed a wage and hour class action in the California Superior Court, County of Fresno, which was subsequently removed to the United States District Court for the Eastern District of California, naming as defendants their employer, a Merry Maids franchisee; BBSI, which was providing PEO services to the franchisee; and various parties related to the franchisor. Plaintiffs claimed, among other things, that BBSI and the franchisor were their joint employer with the franchisee and therefore jointly responsible for the alleged wage and hour violations. BBSI's position is that it was not the plaintiffs' joint employer. Notwithstanding, the plaintiffs and BBSI reached an agreement to settle the matter, which was filed with the trial court for court approval pursuant to the rules for class action settlements. The settlement was granted final approval in October 2025 and in November 2025 BBSI satisfied all payment obligations under the settlement agreement. As of December 31, 2025, no amount remains recorded in other accrued liabilities in the consolidated balance sheets related to this matter. BBSI is subject to legal proceedings and claims that arise in the ordinary course of our business. There are significant uncertainties surrounding litigation. In consideration of these factors, management has recorded estimated liabilities totaling $ 0.5 million within other accrued liabilities in the consolidated balance sheets. 63 Note 12 - Subsequent Events We have evaluated events and transactions occurring after the balance sheet date through our filing date and noted no events that are subject to recognition or disclosure. Item 9. CHAN GES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A. CO NTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures” that are designed with the objective of providing reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply their judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31, 2025. Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our ICFR is a process designed by, or under the supervision of, our CEO and our CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP in the United States of America. Management, with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of our ICFR based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2025. The effectiveness of the Company’s internal control over financial reporting has also been audited by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, as stated in their report included below. Changes in Internal Control over Financial Reporting There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Inherent Limitations Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems' objectives are being met. Further, the design of any control systems 64 must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors or mistakes. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Chief Executive Officer and Chief Financial Officer Certifications The certifications of our CEO and CFO required under Section 302 of the Sarbanes-Oxley Act have been filed as Exhibits 31.1 and 31.2 to this report. 65 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Barrett Business Services, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Barrett Business Services, Inc. and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 25, 2026, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Portland, Oregon February 25, 2026 66 Item 9B. OT HER INFORMATION Rule 10b5-1 Trading Arrangements During the quarter ended December 31, 2025, the executive officers of the Company listed below adopted a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K adopted under the Exchange Act). There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408(c)) adopted , modified , or terminated by the Company’s directors and executive officers during the quarter ended December 31, 2025. The Rule 10b5-1 trading arrangements listed below were adopted in accordance with the Company’s Insider Trading Policy. Actual sale transactions made pursuant to the Rule 10b5-1 trading arrangements described below will be disclosed publicly in Section 16 filings with the SEC in accordance with applicable securities laws, rules, and regulations. Maximum Number of Shares That May Be Sold Name and Title Action Plan Date Under the Plan Plan Expiration Date Gerald Blotz , Executive Vice President and Chief Operating Officer Adoption December 15, 2025 Indeterminable (1) July 10, 2026 James Potts , Executive Vice President and General Counsel Adoption December 15, 2025 Indeterminable (2) July 31, 2026 (1) Mr. Blotz's Rule 10b5-1 Trading Plan (the "Blotz Plan") provides for the potential sale of up to (i) 18,257 shares of common stock beginning on July 3, 2026 upon the vesting of restricted stock units ("RSUs") that are expected to vest on July 1, 2026, and (ii) 14,354 shares of common stock beginning on March 16, 2026 from performance stock units ("PSUs") that vested on February 23, 2026. Shares in the Blotz Plan underlying RSUs and PSUs may only be sold following satisfaction of the applicable time-based and performance-based vesting requirements. Additionally, shares will only be sold provided that the market price of the Company’s common stock is higher than minimum threshold prices specified in the Blotz Plan. Due to the minimum threshold prices, the time-based and performance-based vesting requirements, and the number of shares to be withheld to satisfy applicable tax obligations, the exact number of shares to be sold pursuant to the Blotz Plan is not yet determinable. For purposes of this disclosure, we have included the maximum number of shares available to be sold without regard to vesting or withholding conditions. The Blotz Plan is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. (2) Mr. Potts’s Rule 10b5-1 Trading Plan (the "Potts Plan") provides for the potential sale of up to (i) 11,508 shares of common stock beginning on July 3, 2026 upon the vesting of RSUs that are expected to vest on July 1, 2026, and (ii) 6,350 shares of common stock beginning on March 16, 2026 from PSUs that vested on February 23, 2026. Shares in the Potts Plan underlying RSUs and PSUs may only be sold following satisfaction of the applicable time-based and performance-based vesting requirements. Additionally, shares will only be sold provided that the market price of the Company’s common stock is higher than minimum threshold prices specified in the Potts Plan. Due to the minimum threshold prices, the time-based and performance-based vesting requirements, and the number of shares to be withheld to satisfy applicable tax obligations, the exact number of shares to be sold pursuant to the Potts Plan is not yet determinable. For purposes of this disclosure, we have included the maximum number of shares available to be sold without regard to vesting or withholding conditions. The Potts Plan is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. Item 9C. DIS CLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 67 P ART III Item 10. DI RECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The Company has adopted an insider trading policy governing the purchase, sale, and other dispositions of our securities, applicable to our directors, officers, employees, and other covered persons, as well as procedures for the repurchase of its securities. The Company believes that its insider trading policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq Stock Market LLC listing standards applicable to the Company. A copy of the Company’s insider trading policy was filed with our 2024 Annual Report on Form 10-K as Exhibit 19.1. Additional information required by this item is incorporated by reference to the information set forth under the captions or subcaptions “Proposal 1: Election of Directors,” “Audit and Compliance Committee,” “Background and Experience of Executive Officers," and “Code of Ethics” in our definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the “Proxy Statement”). Item 11. EXE CUTIVE COMPENSATION The information required by this item is incorporated by reference to the information set forth under the captions “Director Compensation for 2025” and “Executive Compensation” in the Proxy Statement, other than the information under the subcaption “Pay Versus Performance.” Item 12. SE CURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the information set forth under the caption "Stock Ownership of Principal Stockholders and Management – Beneficial Ownership Table" and “Additional Equity Compensation Plan Information” in the Proxy Statement. Item 13. CER TAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the information set forth under the caption "Proposal 1: Election of Directors" and "Related Person Transactions" in the Proxy Statement. Item 14. PRIN CIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to the information set forth under the caption "Matters Relating to Our Independent Registered Public Accounting Firm” in the Proxy Statement. 68 PART IV Item 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES Financial Statements and Schedules The Financial Statements, together with the report thereon of Deloitte & Touche LLP, are included on the pages indicated below: Page Report of Independent Registered Public Accounting Firm-Deloitte & Touche LLP (PCAOB ID: 34 ) 35 Consolidated Balance Sheets as of December 31, 2025 and 2024 37 Consolidated Statements of Operations for the Years Ended December 31, 2025, 2024 and 2023 38 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023 39 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023 40 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023 41 Notes to Consolidated Financial Statements 42 No schedules are required to be filed herewith. Exhibits The following exhibits are filed or furnished herewith or incorporated by reference and this list is intended to constitute the exhibit index. Incorporated by Reference Exhibit Number Exhibit Description Form File Number Exhibit Filing Date Filed or Furnished Herewith 3.1 Charter of the Registrant, as amended through June 4, 2024 . 10-Q 0-21886 3.1 7/31/2024 3.2 Bylaws of the Registrant, as amended through May 27, 2020 . 10-Q 0-21886 3.1 8/5/2020 4.1 Third Amended and Restated Credit Agreement between the Registrant and Wells Fargo Bank, National Association (“Wells Fargo”), dated as of March 1, 2022. 10-K 0-21886 4.1 3/7/2022 4.2 Second Amendment, effective as of August 1, 2025, to Third Amended and Restated Credit Agreement between the Registrant and Wells Fargo Bank, National Association. 8-K 0-21886 4.1 9/22/2025 4.3 Amended and Restated Security Agreement: Business Assets, dated as of March 1, 2022, between the Registrant and Wells Fargo. 10-K 0-21886 4.2 3/7/2022 69 4.4 Amended and Restated Standby Letter of Credit Agreement dated as of June 20, 2018, between the Registrant and Wells Fargo . 10-Q 0-21886 4.4 8/8/2018 4.5 Sixth Amended and Restated Revolving Line of Credit Note effective August 1, 2025 of the Registrant. 8-K 0-21886 4.2 9/22/2025 4.6 Description of the Registrant's Capital Stock. 10-K 0-21886 4.6 2/28/2025 10.1* 2015 Stock Incentive Plan of the Registrant (the "2015 Plan"). 10-K 0-21886 10.2 2/28/2025 10.2* Amended and Restated 2020 Stock Incentive Plan of the Registrant (the "2020 Plan"). 10-K 0-21886 10.3 2/28/2025 10.3* Form of Performance Share Award Agreement under the 2020 Plan. 10-Q 0-21886 10.1 8/4/2021 10.4* Form of Employee Nonqualified Stock Option Award Agreement for grants to Gerald R. Blotz and Gary E. Kramer effective March 28, 2018, under the 2015 Plan. 10-K 0-21886 10.6 2/28/2025 10.5* Form of Restricted Stock Units Award Agreement for Executive Officers under the 2020 Plan . 10-Q 0-21886 10.1 11/4/2020 10.6* Form of Restricted Stock Units Award Agreement for Non-Employee Directors under the 2020 Plan . 10-Q 0-21886 10.2 11/4/2020 10.7* Summary of Compensatory Arrangements for Non-Employee Directors of the Registrant effective January 1, 2025. 10-K 0-21886 10.11 2/28/2025 10.8* Barrett Business Services, Inc., Nonqualified Deferred Compensation Plan . 10-Q 0-21886 10.8 8/9/2017 10.9* First and Second Amendments to the Barrett Business Services, Inc., Nonqualified Deferred Compensation Plan . 10-Q 0-21886 10.1 5/7/2019 10.10* Form of Restricted Stock Units Award Agreement under Nonqualified Deferred Compensation Plan . 10-Q 0-21886 10.1 5/8/2018 10.11* Form of Restricted Stock Units Award Agreement under Nonqualified Deferred Compensation Plan for grants beginning July 1, 2020 . 10-Q 0-21886 10.3 11/4/2020 10.12* Employment Agreement between the Registrant and Gary Kramer Jr., dated April 22, 2020 . 8-K 0-21886 10.2 4/24/2020 10.13* Employment Agreement between the Registrant and Gerald Blotz, dated April 22, 2020 . 8-K 0-21886 10.3 4/24/2020 10.14* Employment Agreement between the Registrant and Anthony Harris, dated April 22, 2020 . 8-K 0-21886 10.4 4/24/2020 10.15* Employment Agreement between the Registrant and James Potts, dated August 14, 2020 . 10-K 0-21886 10.30 3/8/2021 10.16* Amended Death Benefit Agreement entered into by the Registrant and Gerald L. Blotz effective October 30, 2020 . 10-K 0-21886 10.31 3/8/2021 70 10.17* Death Benefit Agreement entered into by the Registrant and Anthony Harris effective June 30, 2020 . 10-Q 0-21886 10.7 8/5/2020 10.18* Amended Death Benefit Agreement entered into by the Registrant and Gary Kramer effective June 30, 2020 . 10-Q 0-21886 10.8 8/5/2020 10.19* Death Benefit Agreement entered into by the Registrant and James Potts effective October 30, 2020 . 10-K 0-21886 10.34 3/8/2021 10.20* Barrett Business Services, Inc. Amended and Restated Annual Cash Incentive Award Plan . 10-K 0-21886 10.45 3/5/2019 10.21* Form of Indemnification Agreement with each outside director of Barrett Business Services, Inc. 10-Q 0-21886 10.2 8/4/2021 10.22* Form of Employee Nonqualified Stock Option Award Agreement for grants under the 2020 Plan in 2024. 10-K 0-21886 10.26 2/28/2025 19.1 Insider Trading Policy . 10-K 0-21886 19.1 2/28/2025 21. Subsidiaries of the Registrant . X 23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. X 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a). X 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a). X 32. Certification pursuant to 18 U.S.C. Section 1350. X 97.1 Executive Compensation Recovery Policy. 10-K 0-21886 97.1 3/1/2024 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X 104 Coverage Page Interactive Data File (embedded within the Inline XBRL document). X 71 * Denotes a management contract or a compensatory plan or arrangement. Item 16. FORM 10-K SUMMARY None. 72 SIGN ATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BARRETT BUSINESS SERVICES, INC. Registrant Date: February 25, 2026 By: /s/ Anthony J. Harris Anthony J. Harris Executive Vice President and Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 25th day of February, 2026. Principal Executive Officer and Director: /s/ Gary E. Kramer President and Chief Executive Officer and Director Gary E. Kramer Principal Financial and Accounting Officer: /s/ Anthony J. Harris Executive Vice President and Chief Financial Officer and Treasurer Anthony J. Harris Majority of Directors: /s/ Thomas J. Carley Director Thomas J. Carley /s/ Joseph S. Clabby Chairman of the Board and Director Joseph S. Clabby /s/ Thomas B. Cusick Director Thomas B. Cusick /s/ Mark S. Finn Director Mark S. Finn /s/ Anthony Meeker Director Anthony Meeker /s/ Carla A. Moradi Director Carla A. Moradi /s/ Alexandra Morehouse Director Alexandra Morehouse /s/ Vincent P. Price Director Vincent P. Price 73