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Barrett Business Services, Inc. (NASDAQ:BBSI)

Q2 2013 Earnings Conference Call

July 24, 2013 12:00 pm ET

Executives

James Miller – Vice President, Finance and Chief Financial Officer

Michael L. Elich – President and Chief Executive Officer

Analysts

Jeff Martin – ROTH Capital Partners

Josh D. Vogel – Sidoti & Co. LLC

Kevin M. Casey – Casey Capital LLC

Operator

Good morning, everyone, and thank you for participating in today’s conference to discuss BBSI’s Financial Results for the Second Quarter Ended June 30, 2013. Joining us today are BBSI’s President and CEO, Mr. Michael Elich, and the company’s CFO, Mr. Jim Miller. Following their remarks, we will open the call for your questions.

Before we go any 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’s remarks during today’s conference 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 a replay through August 24, 2013, starting at 3 pm Eastern this afternoon. A webcast replay of this 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.

James Miller

Thank you, Craig, and depending upon where you’re 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 second quarter ended June 30, 2013. Obviously, we are pleased with those results. The second quarter’s gross revenues represented the highest quarterly revenue figure on our company’s history and the six consecutive quarters we grew more than 30%.

We continue to see robust growth from our strong referral channels driving new business, increased organic growth from existing clients, and heightened brand awareness within our market. Investments in our operational infrastructure played an integral role in the quarter’s results, and will continue to be an important strategic initiative as we prepare BBSI for the future growth.

Ultimately, we’re confident BBSI’s brand will continue to mature in the marketplace. 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 is compared to a net revenue basis that reporting have no effect on gross margin dollars, SG&A expenses, or net income.

Now, turning to the second quarter’s results, total gross revenues increased 37% to $675 million over the second quarter of 2012. California, which comprised approximately 88% of our overall second quarter gross revenues, increased 38% due to continued growth in our PEO business and to increased organic growth from existing clients.

Overall, PEO gross revenues increased 38% to $639.7 million over the second quarter of last year primarily due to the addition of new client as PEO business from new customers nearly tripled our lost PEO business from former customers, as compared to 2012 second quarter, which follows a similar trend we’ve experienced over the past six quarters.

Our PEO revenues from existing customers increased approximately 12% year-over-year due to increases in both head count and hours worked. This compares to a 8% increase experienced during the first quarter of 2013. Staffing revenues for the second quarter of 2013 increased 16% to $35.3 million primarily due to increase in new business as the increase in business from existing customers nearly equaled lost business from former customers.

During the second quarter we saw staffing revenue growth in all of our geographic regions. On a percentage basis, gross margin in the second quarter was 3.5% as compared to 3.3% for the second quarter of 2012. The key components of this quarter’s gross margin are as follows; direct payroll cost as a percentage of gross revenues in the second quarter decreased to 84.3% compared to 84.7% in the same quarter last year due to increases in the overall customer market percentages as a result of price increases experienced primarily during the past 12 months.

Workers compensation expense as a percentage of gross revenues was 4.3%, which represents a 30 basis point increase over the same quarter a year ago primarily due to an increase in the provision for estimated workers comp claims cost, as well as the higher broker commissions and higher safety incentives.

Looking ahead to the third quarter of 2013, we anticipate the level of gross revenues for workers compensation expense to continue in the 4.2% to 4.3% range. Payroll taxes and benefits as a percentage of gross revenues for the second quarter was 7.9% compared to 8% of gross revenues in the year ago quarter, as the effective payroll tax rate were similar between the second quarters of 2013 and 2012.

SG&A expenses increased 37% to $14.5 million compared to $10.5 million in the second quarter of 2012, primarily due to higher branch incentive pay based upon increased branch performance, increases in management payroll, as well as the variable expense components within SG&A to support the continued growth in business.

The provision for income taxes in the second quarter was $3 million, which represented a tax rate of approximately 33.4%, we expect such a rate to continue for the balance of 2013. For the second quarter of 2013, net income increased 57% to $5.9 million, compared to net income of $3.7 million in the same period last year. Diluted earnings per share in the second quarter was – increased 51% to $0.80 per share compared to $0.53 per diluted share in the year ago quarter.

Now, turning to the balance sheet at June 30, during the second quarter of 2013, we posted $63.9 million in restricted investment to collateralize the letter of credit issued to satisfy an increased surety requirement for our self-insured workers’ compensation program in the State of California.

Beginning in 2013, the State of California changed its method of calculating surety requirement to be based on an actuarial valuation for each self-insured employer in the State. While this requirement is part of the recent legislative reform in California, it is then related to our compliance with Senate Bill 863. I should point out that while this change represented a sizable increase to the letter of credit previously posted, we have continually maintained the discipline of keeping cash investments on our balance sheet to fully fund our workers comp liabilities, which are also determined by the same actuarial valuation process.

Therefore, the restricted investments provide a more formal external presentation to how we have always viewed these funds internally. This change will have no effect on cash needed to run the business. As a result on June 30, 2013, our cash, cash equivalents, and marketable securities totaled $18.6 million, compared to $72.4 million at December 31, 2012. Of the $18.6 million at June 30, approximately $7.1 million is unencumbered, or set another way, not part of our captive insurance subsidiary.

At June 30, 2013, we have no outstanding borrowings on our revolving credit facility. Our expectation is that we will remain out of line for most if not all of the second half of 2013 as cash will continue to build from operations. We generated approximately $17.4 million in operating cash flow during the first six months of 2013.

Most of our cash generated from operations is in the form of free cash flow except to the bill in workers’ compensation safety incentives liabilities as cash used to fund our insurance subsidiaries is primarily generated from the workers’ compensation expense we recognized, but do not immediately payout to the third parties. During the period of growth, our free cash flow will tend to be in line or exceed our net income on annual basis.

Now, turning to our outlook for the third quarter of 2013, we are expecting gross revenues to grow at least 31% to a range between $730 million and $735 million compared to $588 million in the third quarter of 2012.

The projected increase of 2013 third quarter gross revenues is based upon our recent revenue trends. We expect diluted income for common share to increase at least 30% to a range between $1.05 and $1.10 compared to $0.81 in the third quarter of 2012. We continue to be very enthusiastic about the momentum in our financial results over the first half of the year. I look forward to addressing you again in our third 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 second quarter and our outlook for the third quarter of 2013. Mike?

Michael L. Elich

Good morning, and I appreciate you taking time for the call. I’m very pleased with another successful quarter. We saw a fall through of the build in revenue run seen in late March continue into and throughout the quarter. As a result, the run rate exceeded expectations, we originally modeled within internally for May and June, which although it was difficult to model two plan, to plan and grow in excess of 30%. We continue to run well and feel that we are making investments to keep us in front of the curve.

In the quarter, we added 201 new clients, we lost 38 new clients. Of this 38, we lost due to AR issues, 14 were countable for non-AR risk or tier related issues, 12 businesses actually sold, which is a little bit higher than we’ve seen in the last couple of quarters, three lost on their own due to price, three took pay-roll in-house and four left to work with the competitor.

We see the net new build of 163 clients in the quarter, a very strong and key to the continued growth of our base while maintaining a 95% plus retention rate in our existing client, while we had actually increased margins over the last four quarters.

We did see strengths within our existing client base with the increase of hiring and hours worked over first quarter. 48% of our clients added hours worked, 25% of our clients reduced hours worked, and our – excuse me, head count, 48% added head count, 25% reduced head count, and 27% were unchanged. Of our client base, 57% of our clients increased hours worked, while 40% of our clients reduced hours worked. In comparison, through the first quarter we saw 57% of our client increased hours worked while 46% of our client increased hours worked in the first quarter.

Related to our pipeline, we continue to see strong momentum across all regions. In the quarter, all regions saw strong growth as Jim had mentioned, anywhere from 23% to 39%. We continue to see strong diversification in the type of business we are bringing on which remains primarily blue to grey collar mix. If anything, we are seeing a larger client prospect coming into our pipeline, but at this point we still – we have no client, it is larger than 1% of our total book. Our primary objective obstacle to growth has been the amount of capacity we have built out in front of our demand.

We seem to have made significant progress in the last six months in this area. We will continue to invest in infrastructure to support the integrity of our product. With that and our pipelines remain strong, and we have and as our brand continues to tip within local markets, while we maintain a strong 95% retention rate within our client base, we continue to see strong growth and see that in the foreseeable future.

Moving forward, we continued in the quarter also to make progress in maturing management systems, to recognize outliers within our client, so we are able to focus resources more effectively on our clients on a proactive basis. We’ve continued to mature our branch within branch structure or business unit teams as they support clients. Our model is that we’ll build branches within branches when we reach a certain tipping point within a branch, where capacity, it makes more sense to build capacity within the branch than add geography.

Today, we have 25 business unit teams operating in – within branches. We have four additional business units in developments currently and we have forecasted for the next 12 months an additional 30 business units, but that will be based on demand and the need for additional capacity. We’ve converted over 90% of our clients to HRP, our new payroll in data platform, process that started in early February, but it’s been in the works for the past few years.

The new system will ultimately offer additional scalability of operational systems, more flexibility, more client flexibility, more robust platform for data structure, and expand interface capabilities to support client data access over time.

The process has gone extremely well given the monumental task and I’ll take our hat off to our teams that have been able to get that done with very little, but no disruption in our existing client base. We continue to work on areas that mature the alignment of brand and branch operations, which supports continued maturity in our referral networks, and we’ll continue to focus on continuing internal organizational development.

Overall, we continue to maintain strong pipelines for new clients, new business while retaining our healthy client base. We continue to see a quality of our client base mature as well. We remain ahead of plan in lining the organization to support our growth curve and we will continue to make necessary investments into the infrastructure to stay upfront.

We continue to make significant progress addressing the issue related to California Senate Bill 863. Of the three options we’ve mentioned previously ranging from licensing our wholly-owned subsidiary insurance company in California to working with existing carriers, we feel we are on track to having a solution in the next couple of quarters.

The key issue at this point is determining our best option for the company over the long-term both financially and for stability. What we do feel we know at this point is that, anyone of solutions should be roughly cost neutral to the existing self-insurance system we currently offer in California. The one demand we will recognize is the need to post collateral based on the amount of premiums that maybe written in any one of the options we may pursue. Given the new law does not come into effect until 1/1/2015, we’re comfortable that we will have the solutions soon.

And last we continue to look internally to infrastructure and support growth while gaining efficiencies and branch operations within corporate support functions, all efforts continue to focus towards strengthening and maturing our organizational product offering, as well as making company in Oregon operationally more scalable to support existing growth.

With that, I’ll turn it over to questions.

Question-and-Answer Session

Operator

Thank you very much. Ladies and gentlemen at this time we will begin the question-and-answer session. (Operator Instructions) And our first question does come from the line of Jeff Martin with ROTH Capital Partners.

Jeff Martin – ROTH Capital Partners

Thanks. Good morning, Mike and Jim.

Michael L. Elich

Good morning, Jeff.

James Miller

Hi.

Jeff Martin – ROTH Capital Partners

Mike, did I hear you correctly, you said that you are forecasting 30 additional business units, could you elaborate on that and over what timeframe?

Michael L. Elich

So what we’re doing currently is, we’ve built somewhat of an algorithm that will give us a pretty good estimate of what’s coming from our pipeline versus what it takes to higher and build the mature and mature an existing built business unit and how long it takes to get to capacity.

So out of this 25 business units we currently have, we have roughly, I would say, we are roughly at about a 60% capacity level within those relative to how fast we’re growing. We know that the four coming in, it’s going to take us to 29, but if our pipeline continues to add 163 clients a quarter net, we can see we’re just to stay out in front of the 30% growth curve. The branch is actually from a ground of our forecasted roughly or requested for 13 additional business units to be built, which in effect if you build them over the next 12 months, would not be fully matured until roughly, we'll even call it 36 to 44 months for now.

So and what that is for each one of those business units, it looks to hire more people one in the capacity of business partner, which is the driver of the overall team, we look at risk management and strength, we look at HR brand strength and we look at payroll capacity. It’s still work in progress, but right now that’s at least how we’re forecasting the need to invest back into the organization relative to the growth curve that we are managing.

Jeff Martin – ROTH Capital Partners

So is it safe to say, you are looking basically to double the business in the next 3 to 4 years based on that?

James Miller

Capacity wise, correct, yes. Meanwhile, we do have excess capacity still built into the organization today.

Jeff Martin – ROTH Capital Partners

Right, okay. And then could you touch on your various geographies, you recently were pulled into some expanded geographies from where you currently are, are you continuing to see that as a trend and maybe you could elaborate on that?

Michael L. Elich

We have not had to add any physical locations in the – since we added physical geography into Monterey and to Valencia last year. The business unit in order of the physical footprint that we have in California seems to be adequate that now we can build business unit team to support most of the geography there.

As far as the Northwest, we have a very strong footprint there. Mountain states, it is strong, I think that as we expand in the Colorado region possibly in Utah and maybe Arizona we will see a need to expand footprint there. But currently, we are able to expand our reach primarily through the development of the business units.

Jeff Martin – ROTH Capital Partners

Okay. And then segueing into potential pioneering of new geographies, is that in the work, so you’re planning longer-term for that and if so what would be the underlying strategy there?

Michael L. Elich

Longer-term currently, you kind of take the market momentum that you are getting and you got to make sure you are capitalizing on that. And so that’s where our focus has been over the last year to 18 months. As we look out, we do see pressure coming from our existing client base in the referral networks to pull it to other states and to open existing our new geography, but we are being very careful at how far or how we can step out before we know that we’ve got a pretty good anchor where we’re already at. All the regions that we are working in are doing well. We get strong growth rate even on the East Coast.

With that, I could see that as an area where we would also maybe expand geography as kind of a wrap around the existing regions that we already have to support some of the outlying markets that we are supporting now, but we are getting pulled to. But for the most part, we know how to do it, it’s more just looking for the drivers that are going to get it there or make a path to go there. But I think it more importantly today is focusing on and making sure that we are supporting the very low penetration rate that we already have in the existing markets. If you figure it, we already we have maybe 2%, 3% top penetration rate in existing markets to get the 5% is a pretty big jump. So we’ve got to take care of that first.

Jeff Martin – ROTH Capital Partners

Great, well, congratulations on a strong performance.

Unidentified Company Representative

Thank you.

Operator

And our next question does come from the line of Josh Vogel with Sidoti.

Josh D. Vogel – Sidoti & Co. LLC

Hi. Good morning, Mike and Jim.

Unidentified Company Representative

Good morning, Josh.

Unidentified Company Representative

Hi, Josh.

Josh D. Vogel – Sidoti & Co. LLC

My first question kind of multi-tier, I was curious when you look at California and the growth you are putting up, it still seems like the market is still pretty under-penetrated. And I was curious from a competitive standpoint, are you seeing a lot of competitors coming into this market given the apparent opportunity there? And then building off of that, can you talk about the pricing environment any competitors are coming in and are they undercutting you?

Unidentified Company Representative

As we’ve seen for years, you’ll have both smaller operators and then larger operators change up from time-to-time and pick a run at it. To-date, we’ve really never seen anybody really have an effect on us. If you go back last quarter, we lost one client to a competitor. This quarter, we lost four, but on a base of an excess of 2,500 close to 3,000 clients, that’s not a real dry down.

I would say that from a pricing standpoint, we’ve been able to go through an increased price that’s pretty much across the board over the last 12 months, and we have seen very, very little attrition relative to that. But I don’t see pricing as being an issue and I really don’t see anybody coming in being able to buy the market. We run a pretty strong operating model that once clients get in, they do see the value of what we bring and it’s hard for competitors to really strip that away. When we’re looking at new market Greenfield, just from our pipeline, we probably see the most competitive pressure there, but even that is not a real – you don’t see one big competitor stepping up. You see probably more of a cross section of a lot of different types of businesses they are trying to compete or maybe model after what we do.

Josh D. Vogel – Sidoti & Co. LLC

Okay. And with regard to the 30 additional business units you are talking about, how long does it take to build out a business unit and would this be kind of smoothed out over the next 12 months or should we expect to see 15 or 20 built out in any one quarter?

James Miller

No, it will be smooth, and in fact, the process to build them is recruiting. So you’ve got to add a payroll ultimately. That’s where it’s seen. Then you have the team that’s developing and then you have a kind of a build within the client base around that team. So as for the 12 to 18 months really comes in, it takes you about six months just to hire in that group. So I don’t really estimate that you’re going to see it look a lot different than you’ve probably seen it look over the last year to two years as far as incremental increase just to overhead, just to support -- just a broader base of business.

Josh D. Vogel – Sidoti & Co. LLC

Okay. and now looking little longer-term, given pricing is improving in the apparent leverage of the business units, business within business, where do you see peak margins during this cycle?

James Miller

I think it’s still really hard to nail that down. I think that we saw this quarter where just with some incremental hiring by existing clients that you had more flow-through, because it doesn’t cost us more to support that. I think that as you build to a certain level; you are going to find that you are going to have a certain synergy that’s going to offer for economies of scale. but I don’t know that we know what the maximum margin flow-through is going to be at. I think that in the past, we've talked it may be increasing; maybe 0.5 basis point, but it could be more than that. I would not be able to say today based on what our strength has been.

Josh D. Vogel – Sidoti & Co. LLC

Okay. and just one last one, with regard to healthcare reform, can you just discuss your dialog with clients and did a delay in the employer mandate, did that help or hurt you or is that just a nonevent?

James Miller

It’s where it helped us was coming, I think coming into the first of the year, there was a lot of disruption. I think the concussed plans and business owners were very confused as to how they were going to be affected. they were working to get ahead of that curve a little bit, have a plan, but I don’t think they were making the progress that they needed to. so having another year or reprieve in a sense seems to have taken pressure of that conversation. For us, we’re just trying to support our client to come up with the best option. We’re not taking risk in that side of the world.

We see ourselves as being able to support it from a backroom, TPA facilitated that point, but beyond that, we are pretty much neutral in that, other than it does disrupt business when you take current business models and you change up how they have to look at certain aspect of the economics of their business. But most of our clients already offered health insurance. I think with a little bit of time for more of the answers to get that it out in the process that will help, I think it’s been a very confusing process overall. I think when you even sit down and talk to experts, they’re still confused. And I think there’s still a lot of unintended – not a clear idea of what the unintended consequences are on the overall bill, when it finally does become active. So…

Josh D. Vogel – Sidoti & Co. LLC

Okay, that’s hopeful. Thanks a lot for taking my questions.

James Miller

Thank you.

Operator

(Operator instruction) And our next question does come from line of Kevin Casey with Casey Capital.

Kevin M. Casey – Casey Capital LLC

The $63.9 million for the insurance business is that roughly the amount that’s certainly needed, if you did self-insurance subsidiary and then do you get that money back in case you go down in one of the other avenues related to (inaudible)?

Michael L. Elich

That amount would be much more than we would need to capitalize that our insurance subsidiary in California. And I guess that can evolve the $63.9 million that we put up to back that letter of credit that was one option we had. Another option we have and we are going to take a harder look here over the next few months and that is simply posting a surety bond for that. If we went that route, we probably still have a letter of credit, but it might be $10 million to $15 million rather than the full $63.9 million. So we do have options there and some flexibility down the road and that would also help us with just the balance sheet aspects of it. But yeah, the $63.9 million would be far in excess of what we would need to capitalize that potential California insured status.

Kevin M. Casey – Casey Capital LLC

And then on your staffing business, how focused are you guys on that? Are you getting a lot of requests from the customers, are you planning to ramp it like previous cycles or just kind of keep it there to keep your current customers happy?

Unidentified Company Representative

I think if I understand your question correctly, what we’re doing as we ramp into any alternative or new option; one, we are giving ourselves a lot of run rate. We plan to ramp into any alternative options throughout 2014. So just the operational capital or cash will kind of fund the new model as it builds out and then from a calendar standpoint, as clients come to a renewal date with us, we’ll make that transition. And so being that we have been able to see somewhat of a cost neutral perspective for the client and what we are charging in a new system versus what we’ve been doing, the economics don’t really change, and to the client, it should become very neutral. They shouldn’t really note it.

Kevin M. Casey – Casey Capital LLC

Okay. I think you might have – I was talking about your staffing segment.

Unidentified Company Representative

Oh, go complete it, but maybe repeat the question for me, Kevin.

Kevin M. Casey – Casey Capital LLC

So your staffing segment I think was 16%, which I think is very high number in recent history. And historically, during previous up cycles, you guys have really ramped that. It seems like under your management team there is much focus on that? And I was just curious…

Unidentified Company Representative

Sort of.

Kevin M. Casey – Casey Capital LLC

You could just talk about that and to your views for just your current customer base or other customers are using that? And what is kind of driving that growth?

Unidentified Company Representative

Thank you, I apologize for missing that question. No, we’ve have always been pro-recruiting and pro-staffing within our model. The real driver is, especially in the last several years, the staffing. We have not seen staffing to be that strong. Based on the fact that we are very particular about how we do staffing. If we wanted to go out in the market today and just build it, we could build it. The problem with it is, and this kind of comes from our own DNA of being very, I guess, risk sensitive relative to workers’ comp and the type of people we are hiring, but we’ve been very particular not to go down a path of getting into low grades, minimum wage, high risk staffing business. But as we do see that our client based on the PEO side is starting to hire, we are using staffing to augment that as part of our model.

And then the other side of it is that we continue to build relationships with existing clients and continue to source well run companies that want to use staffing for the right reason. So I think, you will continue to see it grow through the next cycle and as we’re maturing that model, we’re continuing to support the growth of that model. It’s just one of those things that it kind of gets dilutive a little bit when you compare it to the growth rate of PEO side, but we’re still very focused in that area.

Kevin M. Casey – Casey Capital LLC

Okay. And then just to clarify something you said. you said the incremental cost on the 30 new teams is similar to the past. I assume you mean that perspective revenue. Is that correct?

Michael L. Elich

No. Probably if you look at just overheads and how overheads have ramped relative to growth rate in top line revenues, you’ll see that continue. There will be a point at which you’re going to see that the incremental add of new team, which might cost $0.5 million would now be diluted by more growth from the overall business and that’s where you’ll see more margins start to just to flow through.

And so you see it in two sides, you’re going to build a team today that we already have the business to get them up to speed, but it will take about a year and a half before five or six months to year before that team itself is breaking even. And then beyond that, it will leverage itself quite a bit. So the costs you’re going to see is it’s going to see from existing earnings to build those teams that you’re really building a wider base to support a wider base to business over time.

Kevin M. Casey – Casey Capital LLC

Okay. And then just to clarify Josh’s question about the competitive environment. The competitive environment for a Greenfield client, is that still them doing it in-house, them choosing one of the payroll guys, or is that the main competition, or is there a new guy trying to replicate your model?

Michael L. Elich

We’ve not seen anybody that’s shown up in the market that had any success in replicating our market. I think you still see continued flow, the traditional me to guys, ADP paycheck out there, we do tend to discuss lot of business from them mainly, because they own such a big market. And as we go in, we’re providing a very different product offering and so clients are moving towards that, that’s one area.

We’re not losing business the other direction for the most part to them. Where you do see is there is some local regionals the TriNet, just by SOI bought (inaudible), we’re bumping up against them a little bit, but we’ve seen no real – they’re not affecting our ability to grow. So nobody is really showing up and saying, we’re going to replicate BBSI’s model. I think it’s a very hard model to build. I don’t know that if I had to start it over and do it again, I don’t know if I could build it twice. I don’t know if I would want to try it. But for the most part, we’re not seeing competitive pressures to that degree, no.

Kevin M. Casey – Casey Capital LLC

Okay, great. Thank you.

Operator

And at this time this will conclude the question-and-answer session. I would like to turn the call back over to Mr. Elich for any closing comments.

Michael L. Elich

Again, thanks for continuing to show up and visit and made us on the call. It’s been a great last 12 months. It’s been a great last couple of years for me. It’s very rewarding to see a company come together – mature come into its own, and as I continue to say, our best days are still ahead of us, so looking forward to talking to you on October. Thank you.

Operator

Thank you very much. Ladies and gentlemen that will conclude the conference for today and we do thank you for your participation. You may now disconnect your lines at this time.

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