Michael Elich - President and CEO Jim Miller - CFO.

Jeff Martin - ROTH Capital Partners Matt Blazei - Lake Street Capital Markets Bill Dezellem - Titan Capital Management Matt Schwarz - Maze Investments.

Good morning, everyone, and thank you for participating in today’s conference call to discuss BBSI’s Financial Results for the Third Quarter Ended September 30, 2015. Joining us today is BBSI’s President and CEO, Mr. Michael Elich; and the Company’s CFO, Mr. Jim Miller. Following their remarks, we’ll open the call for your questions.

Before we go further, I would like to take a moment to read the company’s Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. The company remarks during today’s conference call may include forward-looking statements.

These statements along with other information presented that are not historical facts 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.

I would like to remind everyone that this call will be available for replay through November 28, 2015, starting at 3 PM Eastern Time this afternoon. 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.barrettbusiness.com.

Now, I would like to turn the call over to the Chief Financial Officer of BBSI, Mr. Jim Miller. Sir, please go ahead..

Thank you, Audra and depending upon where you are dialing in from, good morning or afternoon everyone. As you saw at the close of the market yesterday we issued a press release announcing our financial results for the third quarter ended September 30, 2015.

The company delivered strong results in Q3 with sales up 17% and passing the $1 billion quarterly revenue threshold for the first time in our history. These results were driven by the addition of 150 new client companies and strong same-store sales growth of 10.6%.

This was tempered by a slight year-over-year decline in our staffing business due to some seasonal and episodic fluctuations that can be experienced from time to time in the staffing industry. We will expand upon this later in our prepared remarks.

Before taking you through our financial results I would like to mention that yesterday's earnings release summarizes our revenues and cost of revenues on a net revenue basis as required by Generally Accepted Accounting Principles or GAAP.

Most of our comments today, however, will be based upon gross revenues and various relationships to gross revenues because we believe such information is; one, more informative as to the level of our business activity; two, more useful in managing and analyzing our operations; and three, adds more transparency to the trends within our business.

Comments related to gross revenues as compared to a net revenue basis of reporting have no effect on gross margin dollars, SG&A expenses, or net income.

Now turning to the third quarter results, total gross revenues increased 17% to $1.1 billion over the third quarter of 2014 primarily due to the continued build in our co-employed client count and same-store sales growth, partially offset by a 4% decline in staffing revenues.

Overall, PEO gross revenues increased 19% over the third quarter of last year to $1 billion due primarily due to the continued build in our client count and same-store sales. Our PEO revenues from existing customers increased approximately 10.6% year-over-year due to increases in both headcount and hours worked.

This compares to a 9.2% increase last quarter and an 8.3% increase in the third quarter of 2014. Staffing revenues for the third quarter of 2015 were approximately $46.6 million, representing a 4% decline from the 2014 third quarter.

This decline was due primarily to the impact of the drought in California and the Northwest on our seasonal agricultural business which is particularly active in these regions during the third quarter due to the cherry, apple and wine producers we support.

Additionally, we are seeing a tightening labor market and a shortage of qualified employees in some markets. We have chosen not to pursue staffing instance in instances where we are unable to place skilled talent or where wages are being depressed as we believe pursuing lower margin opportunities is not in the best interest of the company.

On percentage basis, gross margin in the third quarter was 4.2% compared to 4.1% last year which set aside the additional workers comp charge taken during the 2014 third quarter. The key components in this quarter's gross margin are as follows.

Direct payroll cost as a percentage of gross revenues declined 17 basis points in the third quarter of 2014 to 83.9% which reflects an increase in the overall average customer markup percentage on a year-over-year basis.

We evaluate pricing on an as-needed basis to account for operational demands and market trends and we have thus far been able to offset various incremental cost to maintain a similar gross margin percentage. For the third quarter, payroll taxes and benefits as a percentage of gross revenues declined 20 basis points to 7%.

The lower effective payroll tax rate for the 2015 third quarter resulted from a decline in overall state unemployment tax rates where BBSI does business for 2015 as compared to 2014. Workers' compensation expense as a percentage of gross revenues was 4.9% and represents an increase from 4.6% in the third quarter of 2014 on a normalized basis.

As expected and consistent with the first six months of 2015, the year-over-year percentage increase is due to an increase in loss accrual rate, incremental expense associated with the ACE program and the collateral cost related to satisfying the security requirement for the run-off of the California Self Insurance program.

As you may recall, the 2014 third quarter included an $80 million incremental charge to the company’s workers comp reserves which put our actual workers’ comp expense in the third quarter of 2014 at 13.5%. Looking at the fourth quarter of 2015, we anticipate the level of worker's comp expense to range between 4.9% and 5% of gross revenues.

During the third quarter we closed an additional 75 claims from years 2012 and prior resulting in approximately $1 million credit as well as the progress we reported for each of the past three quarters and also supports the results we expected of the claims strengthening process initiated in late 2013.

To-date this brings the closure of 725 claims or approximately 56% of the total strength in claims from 2012 and prior, yielding 8.8 million in total credits. Specifically we are seeing continued trend of claims from years 2012 and prior closing for [indiscernible] put up on these specific claims.

The significance of the 2012 and older claims is that they are now well seasoned and having been fully strengthened provide us with a solid basis for analyzing the development of claim years 2013 through 2015. The number of total open claims from 2012 and prior is now less than 800.

SG&A expenses increased 20% to $25.4 million compared to $21.1 million in the third quarter of 2014. This increase is due primarily to incentive bonus paid to the field as more branches reach profit sharing thresholds. It also represents continued investments in infrastructure to support future business growth.

While it is important that we prudently invest to stay in front of expansion on a fiscal year basis, we continue to target the rate of SG&A to grow in line or less than our gross revenue growth.

Income from operations for the third quarter of 2015 was $17.8 million and represents the leverage we would expect in our bottom line once we repay our outstanding debt. The provision for income taxes in the third quarter was $5.9 million which represented a tax rate of approximately 33.8%.

The lower rate was primarily due to higher than anticipated employment tax credits taken on our 2014 federal tax return which we filed in the 2015 third quarter. We expect the tax rate for the balance of 2015 to be in the upper 30s. Net income for the third quarter of 2015 was $11.6 million resulting in diluted income per share of $1.57.

Now turning to the balance sheet, our cash, cash equivalents, marketable securities as well as restricted securities totaled $273.9 million at September 30, 2015 compared to $239.1 million at December 31, 2014. At September 30, 2015 we have no borrowings on our $14 million revolving line of credit.

During the third quarter, we funded approximately $33.8 million of cash into the ACE Trust account to supplement the $59.4 million funded in the first six months of 2015 and $50.1 million funded at December 31, 2014. These funds are included as a component of restricted marketable securities and workers compensation deposits in long-term assets.

A portion of these funds represents an estimate of injury claims to be paid out in the next 12 months and are included in current assets on our balance sheet. The balance in the ACE Trust account is expected to build for the foreseeable future as growth into the program continues.

However, we project that most of the funds for the remainder of 2015 will come from the expense we accrue in workers compensation line item. In long-term assets, we show $88.3 million of restricted securities certificates and deposits.

This represents cash secured letters of credit to satisfy collateral requirements associated with run-off of our expired self-insurance workers’ compensation program in California.

During the 2015 third quarter, the State of California reduced our security requirement, which resulted in approximately 26 million of previously short-term restricted certificates of deposits being moved into cash at September 30, 2015.

Going forward, we anticipate semiannual decreases to the security requirements, as the outstanding California self-insured liability, these deposit secure will continue to be in a run-off mode.

Additionally, during July, we received approximately 8.2 million of our expected 10 million federal and state income tax refund, resulting from the carryback of the 2014 tax loss to prior year’s taxable income. We anticipate receiving the remaining income tax refunds during the fourth quarter of this year.

While our current ratio does not appear strong, it is important to note that cash generated from the operations of the business is sufficient to fund the daily needs of the company.

Additionally, we expect to fund the $15 million installment of bank debt due December 31, 2015, primarily from cash flow generated from operations throughout the fourth quarter of 2015. We generated approximately 51.3 million in operating cash flow during the first nine months of 2015 as compared to 33.5 million in the same period last year.

Much of our cash generated from operations is typically in the form of free cash flow, except for the build of workers compensation liabilities, as cash used to fund the ACE Trust is primarily generated from the related workers compensation expense. At September 30, 2015, approximately 5 million of our cash is through free cash.

During the first nine months of 2015, we made payments totaling 10 million on our term loan with Wells Fargo, representing the scheduled debt repayment. Now, I would like to provide an update on the SEC investigation and the shareholder lawsuits that we have previously disclosed.

Regarding the SEC investigation, we have fully cooperated and provided the SEC with documents it has requested. While there has been no timetable communicated for resolution, we strongly believe that our financial statements and accounting practices are and have been in full compliance with US GAAP.

The shareholder lawsuits include a consolidated class action filed in federal court in Tacoma, Washington and a shareholder derivative lawsuit filed in Maryland state court based on largely the same allegations as those in the class action. All the directors and three executive officers are named as individual defendants in the derivative lawsuit.

We believe the claims in both lawsuits are without merit. The lawyers we have engaged to defend us are well versed in this type of litigation and they have filed motions against the complaints that are typical at this stage of the proceedings. They have instructed us not to comment further, while these matters are pending.

As we introduced last year in order to provide our investors with a more appropriate forward-looking view of our business, we have initiated a rolling 12-month outlook for gross revenues, which we plan to update on a quarterly basis. As such, we continue to expect gross revenues for the next 12 month period to increase approximately 18%.

Included in this expectation is a high single-digit contribution from same-store sales growth as well as growth from new business, consistent with current trends. In addition to quarterly updates to our gross revenue expectations, we expect to make comments about our net income expectations at the end of each fiscal year.

I look forward to addressing you again on our fourth quarter earnings call. Now, I would like to turn the call over to the President and CEO of BBSI, Mike Elich, who will comment further on the recently completed 2015 third quarter as well as our outlook for the remainder of 2015.

Mike?.

Good morning and thank you for taking time to be on the call. Very pleased with the results of the quarter. For the first time, we crossed the billion dollar in revenue mark in a single quarter. I only mention this as we considers this a significant milestone, representing the contribution of many people over many years.

In the quarter, we continued to see progress through the maturation of our brand as measured by the consistency of growth we experienced across all markets. We continued the process of maturing our organizational structure and the process by which we attract, develop and retain people.

Based on our rate of new client adds in organizational bench, we still believe we have at least 18 months runway in our organizational structure today. We also continued to mature systems and internal matrices designed to support predictability in the model, while bringing increased efficiencies to operations.

And looking at the quarter, we added 210 new PEO clients. We lost 56 due to accounts receivable or collections issues, nine were cancelled for non-AR issues and lack of tier progression, 15 businesses sold or closed and 20 left due to pricing, competition or have moved away from an outsourcing model by taking payroll in-house.

This represents an approximate net build in the quarter of 160 new PEO clients. PEO same-store sales increased 10.6%. This specifically measures hiring - increase of hours worked and wage inflation.

Measured sequentially, second quarter 2015 versus third quarter 2015, 44% of our client added headcount, 29% of our clients reduced headcount and 27% of our clients remained unchanged. As mentioned in Jim’s overview, we did see softness in the staffing business during the quarter. We see two drivers in the softness.

First, leading into September, we experienced delay in seasonal employee ramps brought on by extreme droughts in California and the Northwest, primarily in the north-west, it was more eastern Washington and eastern Oregon. These are markets that we provide seasonal labor to support the agricultural industry.

We expect the impact of the drought to normalize as we move into the fourth quarter, but we historically see increased activity related to our non-agricultural sectors. Second, we’re starting to see a shortage in qualified labor in several markets. As Jim mentioned, we will continue to be selective in our hiring practices.

We will continue to maintain our standard and as we see shifts in labor markets. I will note that we have not seen the drought or the labor shortage impact our PEO business, unlike our staffing business, it is not nearly as prone to such seasonal or episodic fluctuations.

Related to pipeline and regional growth, we continue to see maturation and maturity in our brand as evidenced by ongoing interest in our offering. We did see softness in select markets in late August and September, related to rate of closures of new PEO opportunities. August is typically a softer month with activity picking up into September.

Now that we are nearly through October, we believe the softness was more of a delay in contract closures as October has started off strong and reverting to our most recent historical trends, while pipelines continue to be strong. Our general market outlook remains strong with consistent build across all regions.

We continue to see increased momentum coming from the east coast, north-west and mountain states as these regions mature. Related to structure and organizational build, we continue to build and expand business units to support current and future organizational needs and to meet market demand.

Currently, we have 39 business units supporting 54 branches. We have six business units being built and have forecast an additional four business units to be built by the end of first quarter 2016 for an approximate 49 total business units.

In the next few months, we expect to add business units to existing markets in the [indiscernible] Fresno, Bakersfield, Portland and Valencia. We are in the process of opening two new branches, one in Alexandria Virginia and an additional market in Southern California by the end of first quarter 2016.

We anticipate additional markets on the East Coast in 2016. We continue to see positive momentum within new markets opened in recent quarters as well. Related to systems, we continue to focus on the integration and adoption systems developed over the past 18 months.

The adoption of several different systems is allowing for gains and efficiencies in operational delivery as well as enhancing our visibility and predictability which is key to - as we reach new levels of scale.

Related to workers comp and the underwriting of risk, in the quarter, we saw related - relative frequency of claims as a percentage of payrolls, decreased by 3.1% compared to the third quarter of 2014 and a decrease of 2.3% compared to the third quarter of 2013.

Also in the quarter, we continue to see positive claim closures as evidenced by the continued increase in the percentage of claims closed over the past three claim years. We have also continued to see decreases in severity as evidenced by improved trends in ultimate severity for claims years, 2013, 2014 and 2015.

Moving forward, we continue to monitor trends to maintain a proactive position related to workers compensation. We expect this to result in a greater predictability within the model. Looking forward, during the quarter, we completed our annual all meetings and branch reviews.

These sessions provide an opportunity for management to spend a full day with every employee in the company and to bring alignment to the organization as we look ahead. One observation made was how much we have evolved as a company over the past 12 months while supporting double-digit growth.

I continue to be pleased with the strength and the maturity I see in the organization and we continue to focus on elevating talent and developing bench strength. I'm also confident with the progress I see in our approach to the market, the strength of our pipeline and the value we deliver to our clients.

We also continue to see progress in the adoption systems and processes that all will allow us to strengthen engagements with the clients and improve efficiencies over time. As our teams mature and share best practices across markets, we continue to see more consistency in our brand and greater contribution from the entire organization.

With that I’ll open it up to questions..

[Operator Instructions] We’ll go first to Jeff Martin at ROTH Capital Partners..

Good morning Mike and Jim.

Mike, could you touch on the California market with respect to the current employee model, if there is any particular trends that you’re seeing either from an economic standpoint, from a business standpoint or the insurance environment?.

I'll start with the insurance environment, we're not really seeing movement there.

We may be are seeing a little more competition as it relates to some of our competitors be it, TriNet has been more aggressive over the last five, six months, ADP even has been a little bit more aggressive but as it relates to comparables, true comparables we're not seeing more competition is that much of a headwind but maybe more of a market disruption.

Also related to workers comp insurance, we're not seeing big swings in rates, I think that part of that is stabilized to a large degree.

Related to just overall trends, one of the things that I've watched over the last call it seven years since 2008 is everybody has been trying to get back on their feet and it seemed like this year, the economy is doing well, you see kind of a step-up in just overall hiring as a whole but this summer seem to be more of a - I don't know if people just took more vacations or whatever, but it just seemed to be maybe a little bit of a market stall, more so seen in California than in other markets.

I would - I think that the Dow dropping a 1000 points in August probably doesn't help either when look at business owners making decisions to structurally ship their business to go with us.

So that's more anecdotal noise related to what we may be seeing in the market we're not seeing really a huge shift but I think overall our average branch in California was growing somewhere between 15% and 21%. And as we have lot of bigger branches in that market, it kind of evolved, so you’re running up against some large numbers.

So it’s kind of hard to blame that on an economy more than anything else..

And then in terms of the net client build in the quarter, is there anything specific to your strategy that has changed or might be because I know you did some vetting of non-progressing clients dating back probably over a year now but was there anything internally that you did that might have affected that or is it purely kind of a market low?.

No, I would call it a market low, in fact I would say that from a consistency of operations.

We've been pretty - very consistent, you might be able to isolate a branch or two that maybe it’s going through its own inflection point, which is a stall against the growth that they've been experience until they recall a little bit but there is nothing systemic related to that. I think our value proposition is accelerating.

One of the things that we have been doing over the last probably a year is we educating the market on who we are and what we’re really about and ensuring that we are driving our value the right way coming in which is actually supporting the adoption of who we are more effective effectively and so that's why you're not seeing that vetting process that we have to go through before or we are not having to cancel as many clients as we had in the past.

One of the things that we see that’s been an opportunity for us and it’s been a little bit of a rightsizing of how we - of a sector of our pipeline is where a lot of PEOs have come in the market offering a healthcare option.

We have now found new pipeline sources with healthcare brokers because we don't offer healthcare option, are actually prone to bring business to us to be able to compete in that market. But that's too you’re going through an educational process is you bringing online those resources.

So you're yield on enclosures from those pipelines isn’t going to be as high as first until they mature how they interface with us..

And then, any developments of note with your partner ACE?.

It's going well, we’re scheduled to have our annual review with them and it’s going well.

We’ve got a good partnership with them, we spend time with them probably three or four times a year and just to make sure that we’re staying calibrated and we got to make sure that we stop that open dialogue if there are issues but as far as we know the relationship is very strong..

Thanks for your time Mike..

We'll go next to Matt Blazei at Lake Street Capital Markets..

Hey guys, on the workers comp side where are you in terms of the pre-2012 closures.

You said you were at 650 last quarter?.

Yeah, so that, we've now closed 725, so that's 75 in the quarter..

Alright, so you're getting close to the 60% to 70%..

I think we've actually closed about 56% of those reserves strengthened claims, continue to see positive improvements there..

And where those closer to credit as well?.

Yes, so those 75 closed at credit was about 1 million bucks..

Okay thank you..

We will go next to Brian Hardon [ph] at Sidoti..

Hi guys, thanks for taking my call.

How much new client capacities do the existing branches have?.

We look at our pipeline which is, our pipelines are very strong right now. We would look at cap utilization of flow being that probably it's different every market but as a whole we would say that we are still only running probably close to about 50% capacity as a company.

Better said that we would probably say that we have 18 months of runway in front of us, even though we’re continuing to build, if we shut off our build today for new capacity, we would have probably about 18 months before we would start to enter a stress point..

Okay.

And can you talk a little bit more about your plans for new unit growth in the East Coast?.

The way we grow new units or go to new markets is that we pivot around already successful markets. So what we found is our first, excuse me non-California $100 million branch showed up in Baltimore Maryland and it took us many years to build that.

What was happening now is, you reached these levels of operation, you start getting pulled to alternative markets. And so we've been getting pulled more south towards the DC region and that's what leads towards peeling off a block of those clients that we’re supporting from Baltimore and now established a new hub in Alexandria.

So we’ve hired our new manager there, that person is working actually out of the Baltimore office until they get up to speed and then ultimately that person will go down and see it and start and support that branch.

Where we have opened a new branch in Charlotte this last year, we didn't have that critical mass, it was a more of a Greenfield start-up and so it's been a little bit slower in the build process but we do have the right person in place and we’re seeing momentum at least pipeline wise and we'll see more closures coming.

As I continue to look at just the East Coast in general, we’ll continue to do those stair steps around our successful branches as well as capitalize on markets that make sense to start-up Greenfield..

And I could just ask one last question.

Can you just talk a little bit about the debt repayment timetable?.

Sure, yeah, so again we’ve out of the original $40 million loan, we paid off $10 million to-date, we have $15 million payment due at the end of December of this year and there are three repayments of $5 million each scheduled for next June 30th, September 30th and then the final $5 million due December 31 of 2016..

All right, thank you very much..

[Operator Instructions] We’ll go next to Bill Dezellem at Titan Capital Management..

Thank you.

First of all, would you please repeat the PEO same customer change?.

Yes, so same-store sales growth on the PEO business was 10.6%..

And because that has been growing each and every quarter this year, that leads to the question of why and - maybe I’ll just leave it at that, why is that happening?.

It’s typical - if you compare - the better way to compare it is not so much sequentially, but just on a year-over-year basis because there is a seasonal effect in our PEO base as well where you have a little bit more hiring in the third quarter compared to first quarter and second quarter.

So if you were to go back and look at subsequent orders and do that comparison, you would probably see that little uptick in third quarter traditionally..

Okay.

To make sure I'm clear, wasn't the first quarter in the 8s, the second quarter in the 9s, and here in the third in the 10s in terms of percentage increase versus the prior year, so it really is taking into account the seasonality?.

Yeah, I think that what we’re seeing is that in our markets, customers are continuing to do well and it’s really the overall economy effect on our customers and business..

Okay. Well, congratulations on seeing that acceleration. And then, two additional questions.

Number one, do you see any regulatory proposals or any other phenomenon in that area, is that worth watching closely? And then secondarily, you’ve been talking about the pre-2012 claims now for a period of time, is there a point here where you shift to the pre-2013 claims because then 2013 and prior will be more mature?.

Yeah, so ‘13 at the end of this year will now fall into that called ‘12 and prior group. So what you look for is a 36-month window from the beginning of - so '13 - at the end of this year, ‘15, you'll have 36 months in ‘13, so now it will fall into the prior year's block. And so '13 will become part of the ‘12 and prior block by next quarter.

And so that's the first –that answers the first question.

And then the second question, we’re not seeing - it goes - it sits and starts as far as regulatory distresses, so one of the things that I would say that it's been probably the bigger one in this last year and even right now, what's going on is the ACA, Affordable Care Act and now the onset of reporting for ACA, because there is a whole new set of rules that every company has to comply within ensuring that they meet certain deadlines to report a lot of employee data back and that's been a stress point related to employment and small employers.

As far as the industry goes, it comes and goes. One day you hear that there is going to be some kind of regulatory driver that could change what PEO business looks like and then it fades off that you don’t care much about it for a while. But I anticipate that that will be something at some point down the road that we’ll have to look at.

One of the things that we’ve tried to do is build our model and we’re really very close to this as to reach a point where we’re independent of regulatory distress, I guess it would be as it relates to the PEO industry.

So we can become actually non-compliant and run our exact model that we run, and that's probably work - that’s the work that we’re getting now and it will be the work that we’ll round out in 2016 to offset that risk..

That’s very helpful.

And then circling back to the healthcare reporting requirements that actually works to your advantage because it does create more complication stress on the customer base and prospective customer base?.

It does.

It’s just - even for us, it’s one of those things that we’re getting it done, but it is - it's pretty convoluted right now and I think it will be interesting to see as it goes through one cycle, what the cycle - what it looks next year because I don't think that everybody really have a good grasp on the rules or mechanically how to get it done.

We're in good shape. We're - we've made a lot of progress there, we’re getting it done, but it takes a number parties to get it done. It takes the business owner, it takes the healthcare broker, it takes some kind of - somebody to do administratively what needs to get done and so that's the trickiest part of it.

So we're working - we're serving one of those elements, but we also have to work with the other elements as well. But you’re right, it creates stress and it makes it being important [ph] and that much more difficult year-over-year..

Thank you, both..

We’ll take our next question from Matt Schwarz at Maze Investments..

Hey guys, how are you doing? I know, obviously you have braches at different stages of growth and revenue levels, but can you talk a little bit about how the incremental margins change at your branches as they ramp to higher revenue levels?.

So if you look at a maturing branch, think of a branch is in three stages, you’ve got a developing branch, which is a start-up to just getting some momentum going where you’re just trying to get to a breakeven.

You’ve got an emerging branch where all of a sudden, you have margin come through up against operational overhead and it starts to reach operational efficiencies, but as it reaches operational efficiencies, you actually are adding infrastructure.

So to scale, so you kind of this installed a little bit until the branch really reaches a more of a true, maybe a developed level. So in the emerging stage, consider that a branch that’s maybe somewhere between $30 million and maybe $70 million to $80 million in revenue.

That branch itself as it grows will kind of have to reinvest, so you'll see their flow-through of margin maybe being closer to 50% and as they’re investing, it might actually grow to 40% and then they can get it to 60%, but it tends to fluctuate a little bit.

One of the things that we see is that we get a large branch be it, $70 million, $80 million, $100 million. $100 million is a good crossover point.

We don't see that fluctuation as much because there's enough margin - there is enough dollars and margin coming through in volume and even the maturity of the teams are to a level where all of a sudden we see an increase in flow-through that can be closer to 60% to 70% flow-through.

An interesting part of where we're at today in our developmental cycle as a company is, if we were to go back five years ago, it took us 40 years to get to our first six $100 million branches.

Today, we have - we’ll finish this year with around 13 $100 million branches, which means that if you take 13 up against that 54, we're getting closer and closer to maybe that 50% critical mass of branches that are starting to lever. We today also feel like we have another probably six to seven branches probably in position to reach those same level.

So that’s - as you look at stages and branches that’s how incrementally you see more margin flowing through and that’s where you see leverage start at the branch level and ultimately start showing up at the company level..

It’s great.

So it sounds like that’s quite well to hopefully generate some leverage next year as more branches cross over that $100 million level, is that fair way to think of that?.

Yeah, that is.

And one of things that I would say is, as we keep learning a lot along the way, we took what we had known, what we had learned in the last probably three, four years and we've started a branch in Southern California and that branch is already in a short period of time doing - reaching those levels of leverage and we'll see that branch get there probably inside of maybe four years, five years where it's starting to flow-through where the other branches that have come before and they took 20.

So we're becoming more efficient on how we get more branches to that level as well..

Okay, great. All right, thank you very much..

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Elich for closing remarks..

Again, thank you for being on the call. Looking forward to rounding out 2015 and looking forward to 2016. We feel like things are going in the right direction, we’re working on the right stuff and future looks good. Thank you..

And that does conclude today's conference. Again, thank you for your participation..