Good morning, everyone, and thank you for participating in today’s conference call to discuss BBSI’s Financial Results for the Second Quarter Ended June 30, 2015. Joining us today are 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 August 29, 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, Eric. And depending upon where you are dialing in from good morning or afternoon everyone. As you saw the close of the market yesterday, we issued a press release announcing our financial results for the second quarter ended June 30, 2015. Our strong 2Q results continue to be driven by record organic sales and strong new client additions. Same-store sales grew 9.2%, and we experienced a net build of 201 new clients. We also continued to experience favorable workers compensation claim closures following the progress in each of the – our last two quarters which supports the results we expected by the claim strengthening process we initiated in late 2013. 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 second quarter’s results, total gross revenues increased 22% to $971.9 million over the second quarter of 2014, primarily due to the continued build in our co-employed client count and same-store sales growth coupled with a 10% increase in staffing revenues. Overall, PEO gross revenues increased 22% over the second quarter of last year to $929.5 million due primarily to the continued build in our client count…

Good morning and thank you for taking time to be on the call. Very pleased with the results of the quarter, we continue to make significant progress in all areas. We saw progress through the maturation of our brand as measured by the level of growth we see across all markets. We continue to the progress of maturing organizational structure and processes by which we attract develop and retain people. Based on our rate of new client adds and organizational bench we believe we have about 18 months of runway you know organizational structure today. We also continue to mature systems and internal resources designed to support predictability in the model while bringing increased efficiencies to operation. Looking at the quarter, we added 261 new PEO clients. We lost 60 PEO clients, eight were due to accounts receivable or collection issues, 16 were canceled for non-AR and lack of tier progression. 10 were sold or closed, 26 left to either pricing competition or have moved away from the outsourced model to take payroll inside. This represents an approximate net build in the quarter of 201 new clients. We saw same-store sales increase 9.2%. This specifically measures hiring increased and hours worked, and our wage inflation. Measuring sequentially, quarter Q1 2015 versus Q2 2015, we saw 48% of our clients added headcount, 27% of our clients reduced headcount and 25% of our clients are unchanged. Related to pipeline and regional growth, we continue to see momentum and maturation of our brand is evidenced by the continued strong pipelines and ongoing interest in our offering. Our general market outlook is strong, as we consistently build across all regions. We see increased momentum across from the East Coast Northwest and Mountain States as well as consistent momentum that we’ve seen in the past…

Thank you. [Operator Instructions] And we’ll take our first question from Jeff Martin with ROTH Capital Partners.

Thank you. Good morning, Jim, good morning Mike.

Good morning, Jeff.

Good morning, Jeff.

Could you give us a sense – you gave a worker's compensation’s percentage of gross revenue expectation range for the balance of the year of 4.8% to 5%. What are some of the things that could swing that to the lower or the high-end, and maybe basically came in the middle of that in the second quarter and that was down 14 basis points from the first quarter. So what are some of the big swing factors there?

Yes, the real swing factors are not really so much in the loss accrual portion, but more of I guess what I’d call more of the administrative side of things, there is – the state assessment component of that – I think we’ll actually perhaps see some benefit from the decline in the surety requirement, which should give us a little bit of savings going forward on that front. There are other costs though such as risk management, broker commissions, and our program with ACE. And so, while we say 4.8% to 5%, if we had to pick a specific number probably, 4.9% of the midpoint is probably the best guess at this point.

Okay. And then…

So we don’t – I don’t think we’ll anticipate a lot of movement within that number.

Right, okay. With $26 million coming back to CDs you’ve classified as a current asset, is that cash you can use to repay debt?

Not really to repay debt, but what it does help is it provides cash to continue to pay off the existing claims from back years in California where with that cash previously tied up in collateral, over time it starts to create a little bit of a pinch point as most of our cash generated now is either going to pay back debt or it’s going into the ACE Trust. So this just provides a little more flexibility to us for paying off those claims.

Okay. And then walk me through the process of this fall’s actuarial review with claims closing out more quickly than they have historically and with accrual coming back into IBNR. Help me understand what the process is going to be this year, obviously it’s not going to be – it’s going to be a positive for us as I would take it.

Yes, I think it will be positive, and working with our actuaries though as we’ve continued to discuss the reserve, we’re still only about nine months out from with our new actuary and with the fully strengthened reserves, and so they are still working through the process, and it's really one of time more than anything of reaching kind of a new normal of that data. And so, again, we’re probably looking at another 12 to 18 months before that is clear enough to really be able to tell definitively where that reserve will end up landing, but certainly everything we’ve seen to date is very positive on that journey.

Okay. And then Mike, can you give some perspective on the net client ads, I’ve got roughly 780 client ads on a trailing 12-month basis. I know in the past you’d alluded to ballpark roughly a $1 million of gross revenue per client. Do you feel like that’s tracking to that sort of level, and what's your outlook for the pace of client additions in the future?

Yes, I’d say that the size seems to be tracking pretty consistent. The challenges is in realizing new revenues is how you are stacking new clients in, so you really have to break it down into three buckets. You have to look at your same-store sales block, which is all clients have been on more – on board more than 12 months, and that’s the real driver and that’s how we measure same-store sales off of. And then you have clients that are contributing to new revenue that were added in the previous three quarters is adding and they also have a same-store sales comp on it, because of the way they are maturing into our structure, it still -- there is a little more movement in that and then equally you have the number of clients that were stacked in the current quarter. So you have a little bit of a lag affect as you are stacking in, but if you take that same formula of 700 clients, a million a client, $700 million. If you look at we finished last year a little over $3.3 billion top line revenue, if you are just to stack that on top that gets you right around that $4 billion mark, 4 billion to 4.1 billion, which supports our current run rate of growth. So yes, it’s simple back of the napkin math, but that’s – if you are going to backtest it that’s how you would look at it.

Okay, and then one more question before I clear the line here, but in the past you diluted tier progression from your clients and if I recall that 18 months ago you had a certain group of clients that were not progressing and you made it pretty swift move all at once. Could you give us an update on tier progression in general across your client base?

I think what was going on back then as we were moving towards getting the model we’re we knew we could run it with more predictability, we were putting pressure against the organization to get us clean the base and really clear the decks so we could move forward consistently and have the predictability primarily for the utilization of internal capacity. I have no interest in building more structure into the organization to manage the dysfunction of clients that we are not making progress with. So that was really the process we went through, since then if you look at the end of 2013 and into 2014 that rate is really normalized and even what we are seeing today has reasons for cancellation are much more inline with just that client aren’t progressing the way we would hope, we’re ensuring that we’re priced effectively, so we know we are making money with each client that we’re doing business with. We are putting pressure where we need to for sometimes being a good partner with your clients isn’t about tell them everything they want to hear, but also having those hard conversations. And so as our base has been tested over a period of time I think that where you are seeing that normalization of call it 50 to 80 clients leaving a quarter. That seems to be the new normal and over time that will probably narrow itself to being a cleaner like the last two quarters has been right around 60, so give yourself plus or minus 10 clients in any given quarter and it should – that seems to be where we are at today as a percentage of the overall base.

Great. Thanks for your time.

Sure, thank you.

We’ll go next to Matt Blazei with Lake Street Capital Markets.

Hey Mike and Jim how are you?

Good.

How are you Matt?

Good. Couple of a technical questions so you mentioned Jim that you get the $10 million tax refund in July, could you remind us again what further tax refunds your plan to get here before the end of the year?

Well the $10 million is really what the total amount of the tax refunds we expect to get. Now what we’ll see though as we get into 4Q is a lessening of taxes that would normally be due on the 2015 tax year as we still have some loss carry forward as well as some tax credits that we are not able to carry back.

I see so you will be accruing these at the mid-30s – mid-to-high-30s but I mean not necessarily be cash taxes?

Correct.

Okay and are you still on your target to repay I think it was $25 million in the Wells Fargo line is here?

Right. We paid $3 million of that at June 30, and then $7 million is due at the end of September and then $15 million is due December 31.

Got it, okay. And then Mike real quick can you walk through that – planned sort of progression in that new business units and new branches again here over the next year. I'm sorry, I just got it complicated there?

No worries. So as we look at how we are looking an infrastructure, so we’re measuring that up against pipeline momentum right now we’re seeing a lot of consistency coming across our entire base as far as how we are adding to our overall base, one of the things we focus within both branches and then business units is for consistent adds, we’re not looking for home runs, we’re looking for lot of base hits. And so two things are happening one of the things that we see is there are our business units and emerging branches are reaching a level where we’re seeing consistent performance of adds of new business and consistent retention of those clients, which is step number one. Step number two is as you do that your brand matures it starts to tip, your pipelines accelerate and is that happens as well you now put strain on capacity. So we look at capacity utilization of the organization realizing that we can achieve certain levels depending on where the progression and development of the business unit is. So we look at how fast capacity is being stripped out of a business unit based on how fast we’re adding clients, which is the overall formula where we backtest to capacity build. So within existing branches that’s going on consistently we’re seeing progression in on West Coast we’re seeing a lot of progression in the Mountain States right now where structure is pretty good shape. But we’re looking at rate of build which is burning capacity which creates demand for us to add infrastructure that’s step one. Step two is where we look at new markets for opportunity. There is two things that create that that poll is it would be one is where we’re starting to see clients or pipelines pulling us around away from our ultimate base of operations. So we are full trained to stay within 50 miles of anyone of our clients of over time we’re getting pulled two new markets and it simply just make sense to add more infrastructure at some point rather than stretch an existing branch. So right now we see a couple of markets where we could do tuck-ins in the Western 30, United States, but we are not seeing an up stress to be able to say which markets those are, we’ll just continue to keep those under advisement and watch them close. And then on the East Coast as well we opened up a couple of different markets here as of the first of the year and we are going to continue to look out where we want to make investments there as we do have fairly strong momentum on the East Coast as well.

So you’ve opened two branches so far this year and you plan to open four more in the next six months?

Two more we opened two more we opened one on the East Coast and one in San Mateo. And San Mateo was actually a spin-off of our San Jose branch where we spun-out a business unit and we opened a new market. On the East Coast, we went through a similar process in Charlotte. And so now we have two additional markets identified that we’re looking at that we expect maybe possibly to come in online around the end of the year or at least in the first quarter of next year.

And the number of business units is going from 39 you said to 48 over the next 12 months, you think?

Probably over the next six to eight months.

Okay. That’s great, guys. Thanks, great quarter.

Thank you.

[Operator Instructions] We’ll take our next question from Will Dezellem with Tieton Capital Management.

Thank you. I’d like to circle back to your PEO revs. You had mentioned that 9.2% was the – came from existing customers, would you split out for us the break between employee growth, hours worked growth and wage growth?

Well, yes, certainly those are the three components of any increase there, but really I guess what we feel is in headcount and hours worked. There is a little bit of wage inflation that we see, but again the primary factors they are going to be at least for us for this quarter were increasing hours worked and headcount added.

Yes, probably…

Please go ahead.

Well, just looking at their broad bucket so it’s hard to really nail down specifically where the most, but when we look just overall increase to payroll it was 71%. But that’s also represented in that 48% of our clients increased headcount, while 27% of our clients reduced headcount. So you are having a net build there and that’s affecting payroll. We don’t really see that much evidence of wage inflation in the model at this point, but it's more from a client growth standpoint we believe.

Great. Thank you and congratulations on a nice quarter.

Thank you.

We’ll go next to Rich Murphy with Cross River.

Yes, Mike you talked about and I guess might kind of ask this question, but the cash utilization of your [indiscernible] 39 now. How do you describe the utilization in terms of or 50% capacity is 75% and what is the leverage we get at the model as we build out in terms of G&A.

So one of the things that we see in large branches is once a branch reaches a certain point albeit call it a $120 million of operations. We start to see where your incremental add to a business units is not very dilutive in the overall flow through because on a relative basis the size of the branch is diluting it. We’re starting to see and we believe probably in the next two years, we’ll see that start to happen in the overall company. But we’re still in a build mode of the structure to support that larger critical mass. So as we look at capacity utilization today, we’re probably still running right around 50% of utilization of the existing infrastructure. As we continue to see the maturity that’s consistent with where we’ve been in the last couple of quarter and what we really see in the next turn of 12 months. It’s a good chance with that capacity utilization that the CapU will probably tick-up and as we see that happen you are getting more with every labor dollar and all the infrastructure you have flowing through and that ultimately results in earnings leverage. The second part to watch is as we have consistency within the build across the board you’re going to see a great deal and more leverage as well. If you go back a few years ago we were probably getting 80% or 90% of our real business growth was coming from 10% of our operations. Today, we probably have of 100% of the growth of operations we’re pricing contribution from close 60% to 80% of the organization. So as we seek broader contribution you are getting better cap utilization and that’s what you’re going to see operating leverage.

And that’s right and what is your outlook for eight – you have a glide path of 18 months out there, is that what’s giving you confidence in the growth?

Yes, and just looking at who is coming in we’re seeing just maturity level of people that are coming through the door today. As while as we’ve been doing this I would say that we’ve improved substantially, how we bring in mature and just develop our internal bench to support growth and our client needs and that’s what gives me confidence about the 18 months.

And just one other question, you are starting to move out East, is there any risk in that move and what gives you confidence you mentioned Charlotte and what’s your plans for the East Coast to replicate the West Coast of about 35, 39 offices?

I think in time we’ve been on the East Coast for probably 25 years to 30 years it’s just in the last five years that we’re really seeing it come online and doing well. We have very strong team there and one of the things that we see is they’re functioning as a region as a collective unit which has a lot to do with continuity and your ability to scale because of the progress we made on the West Coast we have more energy and resources to apply there compared to what we’ve might be in a couple of years ago and we were going through a rather significantly retooling process even throughout the organization. I think the other thing to that supports the sustainability of building growth on the East Coast will be is that we’ve learned a lot of the lessons. We’ve got a lot of the algorithms written and the lockdown; we know what we have to do to be able to be successful. And one of the things that I feel it gives me a lot of comfort or seeing tremendous consistency in the product offering, structure just and how we go to market across the entire organization which proves that it works in our markets.

Excellent. Congratulation on the quarter, Mike.

Thank you. End of Q&A

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 taking time to stand touch. It’s been an interesting road for us, but I continue to say most things worth doing aren’t necessarily always easy and we’ve made tremendous progress and I’m very, very pleased with where we are at I am proud of the organization as a whole. We have got a lot of great people at shop everyday and we are all in the same direction and we’ll continue to build and mature shows into a great company and hopefully you’ll stand touch and continue to watch the story unfold. Thank you.

Thank you for your participation. We look forward to talking to you again in our third quarter earnings call. Thank you.