Good afternoon, everyone, and thank you for participating in today's conference call to discuss BBSI's financial results for the fourth quarter and full year ended December 31, 2025. Joining us today are BBSI's President and CEO, Mr. Gary Kramer; and the company's CFO, Mr. Anthony Harris. Following their remarks, we'll open the call for your questions. Before we go further, please take note of the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statement provides important cautions regarding forward-looking statements. The company's remarks during today's conference call will include forward-looking statements. These statements, along with other information presented that does not reflect historical fact, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements. Please refer to the company's recent earnings release and to the company's quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ from those expressed or implied by the forward-looking statements. I would like to remind everyone that this call will be available for replay through March 25, starting at 8:00 p.m. Eastern tonight. and a webcast replay will also be available via the link provided in today's press release as well as available on the company's website at www.bbsi.com. Now I would like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer. Please go ahead.

Thank you, Marissa. Good morning, everyone, and thank you for joining the call. I am pleased to report that we had another solid quarter, capping off a year of strong results. While fourth quarter same-customer sales trends moderated and revenue came in slightly below our forecast, our earnings exceeded our full year guidance. We remain optimistic about the future as we execute our short- and long-term objectives and continue to achieve record growth in our worksite employee base. Before I speak about our financial performance, I would like to recap some of the key operational and strategic accomplishments for the year. We are successfully selling and servicing BBSI benefits in every one of our markets. Notably, we are seeing significant wins in white collar verticals, a segment where we previously had a difficult time penetrating. Our strategic sales initiatives have been operationalized and are resulting in greater velocity at the top of the sales funnel, resulting in record WSE adds. We have more referral partners that understand and appreciate our value proposition and are referring more business to BBSI. We finished the year with approximately 26% more active referral partners over the prior year. We continue to invest in our asset-light model and have successfully expanded into new geographies and continue to gain momentum. We successfully converted 2 of these emerging markets to traditional branches. We continue to invest in myBBSI and in our tech stack, which resulted in multiple product releases in 2025. We also made further advancements on our employer of choice initiative and earned the Great Place to Work designation for a fifth year in a row. Client satisfaction continues to drive favorable retention rates. Every year, we conduct a survey of our clients to evaluate customer needs and satisfaction, and I am pleased to report that…

Thanks, Gary, and hello, everyone. I'm pleased to report we finished the year with strong results. For the full year, gross billings increased 8.6% to $9 billion versus $8.3 billion in the prior year, while diluted earnings per share increased 5% to $2.08 compared to $1.98 in the prior year. For the quarter, our gross billings increased 6.4% to $2.4 billion versus $2.25 billion in Q4 2024, while diluted earnings per share increased 2% to $0.64 compared to $0.60 in the prior year quarter. Looking at the quarterly results more closely, PEO gross billings increased 6.6% in the quarter to $2.38 billion, while staffing revenues declined 13% to $18 million in the quarter. Our PEO worksite employees grew by 5.1% in the quarter, which, as Gary noted, was driven by record WSEs added from new clients. This continued a strong trend of controllable growth, which was partially offset by client workforce reductions. Average billing per WSE per day increased 1.5% in the quarter, which was driven by sustained wage growth, partially offset by lower average hours per WSE. Looking at year-over-year PEO gross billings growth by region for Q4. Southern and Northern California both grew by 5%. Our Mountain and East Coast regions grew by 10%. The Pacific Northwest declined by 4% and our asset-light markets grew by 95%. Southern and Northern California are our largest markets. And while we saw growth slow this quarter due to client hiring, the region continues to be supported by strong controllable growth. Our Mountain and East Coast regions continue to deliver very strong results. Our disciplined execution of our growth initiatives has largely mitigated a reduction in year-over-year client hiring. The Pacific Northwest remains the region most impacted by economic conditions. Lastly, our asset-light markets continue to perform well and build their client…

[Operator Instructions] And your first question comes from Chris Moore with CJS Securities.

This is [ Will ] on for Chris. U.S. job growth in early 2026 has been modest, but has shown some signs of recovery after a weak 2025. What are you hearing from your clients in terms of being able to improve growth throughout 2026?

Yes. So it's a great question. Thank you for dialing in. We -- I guess I'll recap what we've seen maybe for 2025 in that trend. So we started 2025, we anticipated modest positive growth, which is really the trend we saw coming out of 2024. That's how we started 2025 in Q1. Q2, that decreased to more of a flat client hiring position. Q3, we reported that went negative for our client base. And then Q4, that deteriorated a little bit further. So throughout 2025, we saw a negative hiring trend sequentially each quarter. And so as we look ahead to 2026, we see the same data you do in terms of there's a lot of fundamentals that look strong in the economy. For our client base, we want to plan conservatively. So we are anticipating that negative trend to continue into 2026 and really kind of reverse pattern. So worse same customer sales in early '26 and then improving as the year goes on in line with those macro forecasts.

And just a follow-up, what are you hearing from clients in terms of being able to pay higher wages in 2026?

Wage growth is real, okay? It's hard -- once you pay somebody a certain amount, it's hard to pay them less. The only way you can kind of reset that is with your new hires. Wage growth is real. It's moderated. It's been in that 2% to 4% range is what we see. So wage growth is real. Client hiring has -- the #1 complaint we still hear is finding good skilled labor. So that hasn't changed. And then on the macroeconomic trends, the -- we're hearing finding workers more and more is an issue, specifically as it relates to immigration trends. So we've seen it in some of our industries like trucking and logistics, where clients are reducing their workforce because they're like CDL drivers, transportation drivers, things of that nature that they're resetting and restructuring their employee base. So it's going to be interesting to see what happens with -- for these skilled trades and these skilled workers for what the growth is going to be in '26. But overall, I mean, we know that our clients have been in a net reduction. And the positive that we have is we've -- we're able to sell and service through it, right? So we've got a good sales machine. We've got a good service machine, which results in good client retention. And year-over-year, we're putting up the best controllable growth we've put up.

Your next question comes from Jeff Martin with ROTH Capital Partners.

I wanted to dive in on payroll taxes a bit. That's also hit the margin this year. Is there any improvement in sight for 2026 on the payroll tax side?

Yes. So those reset, that's a good call out, Jeff. We always have a front-loading of those payroll taxes in Q1, which is why we typically lose money in the first quarter and then balance for the rest of the year. For the trend in terms of the rates for unemployment tax, in particular, we are seeing those modestly higher. Again, that's logical given the correlation to the reduced hiring trends. Not significantly different, though. It's a smaller increase than last year actually. And again, we have mechanisms to price those in. A little bit of a timing difference there on margin sometimes, but we're able to recapture those in our repricing pretty confidently.

Great. And then I wanted to drill down on the workers' compensation pricing environment. It sounds like first half of the year is going to be absorbing some margin with a wait-and-see approach in terms of what market rate does and how you react to that. Is that an accurate understanding? And are you expecting that margins will improve a little bit as we progress throughout the year relative to the starting point, primarily due to the workers' comp pricing environment?

Yes. Jeff, it's Kramer. It's predominantly workers' comp California where we see this, which is a large percentage of our book. I mean we've been we've been talking about for years how costs have been coming down. And with the cost coming down, they've really been passed through as a rate decrease in the market. And we're at the point in the market cycle now that costs aren't coming down anymore. So the only way to inflect is to get more rate. And for us, we've -- you've seen California raise rates. Our trading partners are telling us that the everybody's renewals are more expensive. We're watching the rate filings go up with our competitors. We're looking at scheduled credits decreasing as well. So we're seeing the market conduct behave in an inflection mode. We've been trying to force the market or raise rates for a couple of years now. And some months are good, like if I go back into '25, right, some months are good and we get positive rate on our renewals and some months are bad where we get negative rate. Typically, those -- I'll call it choppy, right? It was choppy and inconsistent. Typically, on those bad months, it was because we had larger accounts that the market was competitive on, and we had to match competitive pricing. So we had puts and takes all throughout '25, good months, bad months. The positive trend that we're seeing now is that when we go and look at the, call it, the last 4 months of our renewals, those last 4 months, we've been able to increase the aggregate markup or the aggregate portfolio rate. So we're able to see -- and if you say you have a good 1/1, you get that for a whole 12…

Okay. And then one more, if I could. In terms of the adjustments to prior year workers' comp claims and the benefit that brings down through the P&L, are you expecting much change from the last 2 years? I think it was about $18 million in aggregate for the year that you brought back?

Just in general, if you look at that trend, that trend will predominantly persist, right? It's never going to go to a 0. If anything, it goes to a slightly lower or slightly higher drip. But it's going to be set up so that knock on wood, all things go well that, that is consistent.

[Operator Instructions] And your next question comes from Vincent Colicchio with Barrington.

Yes, Gary, curious, the new client pipeline of qualified leads, how does that look currently versus what you've seen in previous -- in recent quarters?

Yes. The pipeline is still strong. We've got strong controllable growth. The interesting part was, if I look at 1/1 specifically for what we brought on, we had a better benefit selling season last year. And that was predominantly because we brought Kaiser into our offering for the first time. So we sold into our installed base. But it was, I think, of the benefit season for 1/1, we brought on 80-some clients, which was a really good add. We brought on a lot of clients with no workers' comp or with no benefits as well. We're seeing -- it's not a top of the pipeline issue. We're getting good volume in the top of the pipeline, good consistency through the pipeline. So we've got more people selling our product. We've got better product to sell. We've got more referral partners recommending BBSI. We've got a lot of focus and attention on the controllable. And then when we get the client on, we got all service plans and service procedures that we have. So we feel really strong. If you just go and look at our track record over the last 3 years, right, we've got a very strong track record of controllable growth, and we don't foresee that slowing down. The one thing I would say is as a market is trying to push rate, you do play a game of chicken, right, as far as pricing -- as far as the price to risk and if somebody is willing to do it for cheaper. You do run the risk of higher runoff. But we're modeling in slightly higher runoff because of the moving of the market forces, but it's nothing that gives us any concern. It's what I would say is prudent action at the market timing.

Is -- related to the hiring trending better this year, is that broad-based? Or are some of the more weaker areas like construction continue to not see any good signs?

Yes. I'd say the deterioration we saw broadly was across the country and across industries. But -- and so when we look at that recovery, we're looking at that at the macro level. Certainly, we've said that construction over a kind of multiyear period has been depressed for us as interest rates went up, and we just didn't really see that rebound, particularly in California. So we are still optimistic and really bullish on the long-term trajectory group a lot of homes that need to be built and infrastructure out there.

Your next question comes from Marc Riddick with Sidoti.

So I wanted to just sort of maybe touch on the sort of the question of the day, if you will. I was wondering if you could talk a little bit about what you're seeing or anticipating as far as impact of artificial intelligence on the business and whether that's from the customer end or from yours and how you sort of see that playing out currently?

If you thought my rate answer was long, you better buckle up for this one. We are very thoughtful and very mindful of AI, and we spend a lot of energy on it internally. Anthony can geek out for hours if you allow them, trust me, I try to avoid it. We spent a lot of time with the Board. It's just been -- it's on the top of everybody's list, right? It's -- as a business person, you got to be well aware of what's going on in the world. We -- I think of this as really kind of the 4 legs of the stool, right? So first and foremost, how are you going to use this internally, right? So internally, we've been adopters. We bought models, we bought agents. We're using it within most of the disciplines of the organization to make us more efficient. So IT to accounting to marketing to HR, really, what that allows us to do is to moderate our SG&A growth, right? So we're using it to be more efficient internally. The overarching question for the macro, which is will this create joblessness or better efficiency. I think that this is going to be very industry-specific and will vary. For the industries that we're in the most of, which is the blue collar, I think that this is going to be less impactful. Plumbers still have to plumb and carpenters need to bang nails, and I don't see that going away. We talk to a lot of clients, and I've not heard from any of our clients that any of their reductions in the last 6 months are AI related. They are typically referring to a cooling macroeconomic economy as it's relating immigration tariffs, trade uncertainty, interest rates. So for us, I…

I do appreciate it. I know it's kind of a tricky time to answer that question. I guess one of the other things I sort of would want to talk on -- if you could talk a little bit about as far as general demand trend-wise, if you're seeing much in the way of -- as far as market share gain opportunities, maybe where you're seeing that coming from and how much you're seeing that coming from competitors as opposed to a little less -- a little more outsourcing of what had been done internally up to this point? Are you seeing much of a shift in the way of that demand driver? Or has that changed much over the last couple of quarters?

We get this question a lot of -- we see it more now than we ever have as far as PEO takeaways because we have the health insurance offering that we didn't have previously. But I would say, in general, there's just so much ocean out there to fish in our space that we don't have to have this whole PEO takeaway strategy. So I can tell you that we saw more benefit deal flow for 1/1, right? A, we're getting better at doing benefits, the words out; and then b, health insurance rates were up, and they're up for everybody, not just PEO. So when rates go up, there's more shopping. We did have PEO takeaways, but I would say it's a little more than last year, but not a measurable piece of the book at this point. It's still converting businesses over to the PEO model for the first time. That's our lion's share of our client acquisitions.

There are no further questions at this time. I would like to turn the call back over to Mr. Kramer for closing remarks.

Sure. Thank you, everybody, for dialing in. And I just want to say thanks to all of the BBSI professionals for a great Q4 and a great year, and we are all looking forward to 2026. Thank you, everybody.

This concludes today's conference call. We thank you so much for your participation. You may now disconnect.