TrueBlue, Inc. (TBI) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the third quarter 2015 TrueBlue earnings conference call. My name is Tony and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Derrek Gafford, CFO with TrueBlue.

Good afternoon, everyone. Here with me is CEO, Steve Cooper. I will address the Safe Harbor language and then hand the call over to Steve. This conference call includes forward-looking statements which are subject to known and unknown risks and uncertainties. These statements are based on management's current expectations or beliefs. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements can be found in the company's annual report 10-K filing and other Securities and Exchange Commission filings. Any forward-looking statements in today's call speak only as of the date on which they are made and we assume no obligation to update or revise any forward-looking statements. The discussion today contains non-GAAP terms including but not limited to EBITDA, adjusted EBITDA and adjusted earnings per share. Adjusted EBITDA excludes non-recurring integration and acquisition costs. Adjusted earnings per share excludes non-recurring acquisition and integration cost, amortization of intangible assets and adjusted income tax expense to a 40% marginal rate. These are measurements used by management in assessing performance and in our opinion provide investors with additional insight on the underlying trends of the business. We have provided reconciliations of the non-GAAP measures mentioned here today to GAAP measures on the Investor Relations section of our website at trueblue.com. I will now turn the call over to Steve.

Thank you, Derrek and good afternoon everyone. Today we reported our third quarter 2015 revenue grew 8% to $684 million which produced $44 million of adjusted EBITDA, which was growth of 13% when normalized for certain non-comparable items, including a larger than normal workers' compensation reserve adjustment last year and certain startup cost on new client wins here in 2015. This normalized adjusted EBITDA also shows our adjusted EBITDA margins expanded by 30 basis points to 6.9% on a normalized basis compared to last year. We are thrilled with the results we are reporting today for a couple of reasons. First, our team delivered solid organic revenue results this quarter. The pace of our organic growth took a significant step-up compared to the growth in the first half of the year. We are especially pleased that the results came from a wide variety of geographies and industries as well as broadly from national and local customers. Our legacy TrueBlue brands, along with our new brands from our acquisition of Seaton in July 2014 are all showing strong growth. We are really performing well across all areas of the company and here into early Q4 the growth is continuing to hold strong and even show further acceleration across all service lines. The second area I am excited about in our reporting of our results today is the continued improvement in our profitability. When normalizing our results for a couple of key items, you can see our adjusted EBITDA margins continuing to improve. This comes as a result of the 8% organic revenue growth, which is showing leverage in our profitability by growing our normalized EBITDA margins by 13%. Containing costs and maintaining strong gross margins remains a focus for us as we grow organically. This strategy will provide an opportunity for us to continue to move our adjusted EBITDA margins up and exceed our stated objective to get them above 7% annualized. TrueBlue is well positioned for continued growth in our staffing services segment by serving customers on a local basis through our strong network of almost 700 branches, along with our strong on-premise centralized delivery system serving over 200 client locations. Both our branch network and our centralized delivery team are showing similarly strong revenue growth. We are positioned in the right growing industries with the right service capabilities to continue our momentum in this current environment. We remain confident our staffing business is oriented in the right verticals and positioned well for growth. The demand for general labor and skill trades is strong. Construction growth is continuing to show improvement and is having a positive impact on our results. Businesses across all verticals are searching for and finding the right mix of contingent and permanent workers to drive their businesses forward. In this regard, we can offer more to our customers than ever before and serve new customers because of the investments we have been making. In our workforce management service line of staff management, we are serving some of the largest and fastest-growing companies in North America. We are proud of the quality of service they are delivering and we are excited about how they will shape TrueBlue as we continue to grow and develop our service capabilities here in North America. Our largest customers are now coming from our workforce management group and is now approaching 10% of our total revenue. For our branch-based business, we have continued to make progress in building a more efficient business model here in North America through the use of technology and combining certain leadership and sales teams across our staffing business lines. The efficiency being gained in our staffing services segment will allow us to remain competitive on pricing, along with being the employer of choice for those seeking work and those seeking flexibility in their work. It remains a great environment to be a leader in delivering world-class staffing services that improve the performance of our customers. We are in a leading position in industrial staffing in North America and we are proud of that. Our managed services segment includes our recruitment process outsourcing and our vendor management services. Growth in these service lines has been strong and the pace at which we are winning new deals is promising and should continue to deliver the 14% constant currency growth we saw this past quarter. The RPO business is a fast-growing service in the global human capital management. PeopleScout is positioned well with a world recognized service delivery. We are seeing an increasing number of deals come to market for permanent hire recruiting. With our leading service provider with PeopleScout we are positioned well to respond to these RPO opportunities. We plan to be the leader in RPO by ensuring our RPO delivery model can deliver globally the same award-winning service we have been recognized for here in North America. This will happen by first continuing to grow our North American business and partnering with these strong clients to be their global provider. And second, continue to look for expansion opportunities around the globe to acquire or partner with firms currently providing recruitment services outside of North America. We continue to see great progress in driving this strategy forward. We remain enthused with the organic growth opportunities in our business. We are in the right service lines that are showing growth and demand. I spent most of my time here today discussing our excitement around organic growth. In addition to this, we continue to seek acquisition opportunities to grow TrueBlue with three things in mind. First, expand our service capability by adding additional service offerings to our current customers. Second, expand our current customer list in our current geographies. And third, expand the geographies we serve. With a broader focus on the overall human capital space, our acquisition opportunities are growing beyond acquiring further branch-based businesses. We certainly expect TrueBlue will continue to grow using the same principles of acquiring and integrating companies like we have successfully over the past 10 years and this growth would be significant in addition to the organic growth we are currently experiencing. With our focus on a broader spectrum of capabilities for our customers, we have the opportunity to improve our organic and acquired growth rates from here and continue to deliver the right workforce at the right time to the marketplace. From general labor to skilled trades to workforce management and recruiting full-time positions, we find ourselves well positioned in sectors that are the fastest-growing. Let me turn the call over to Derrek for further analysis and commentary. Derrek?

Thanks, Steve. The company delivered an impressive set of results this quarter with total revenue of $684 million, which was nearly $20 million above our midpoint expectation. Nearly every service line was up 5% or more and the company's top 10 states all experienced improving trends. We saw improvement across all industry verticals with the exception of manufacturing, which continues to face a challenging export market. In construction we saw considerable improvement with 10% growth driven by momentum in both residential and nonresidential markets. Revenue for staffing services was up 8%, with the branch-based operations continuing to deliver strong results within the national customer base and an upturn in demand from small to medium-sized customers towards the end of the quarter. Green energy returned to growth this quarter versus a decline in prior quarters. The on-premise business also continues to deliver strong revenue results with both its largest customer and within the core customer base. Revenue growth for the managed services segment was 10% or 14% on a constant currency basis, boosted by new customer wins and expanded services within existing customers. We continue to win new RPO deals at an encouraging pace reaffirming our optimistic sentiment regarding its growth prospects. Now let's discuss the company's profitability for the quarter. Total adjusted EBITDA was $44 million for Q3, up 5% and in line with our guidance expectation, albeit lower than one might expect given the revenue beat for the quarter due to two items. We incurred $2 million of cost related to obtaining and implementing new customer relationships, which were not included in our guidance expectation. Also the year-over-year gross margin comparison is unfavorably impacted by 20 basis points due to the size of the workers' compensation reserve adjustment in Q3 2014. Excluding the impact of these items, adjusted EBITDA margin expanded 30 basis points to 6.9% and adjusted EBITDA growth was 13%. Staffing services EBITDA was up 10%. Excluding the two items mentioned earlier, EBITDA and EBITDA margin grew by 17% and 70 basis points, respectively. Managed services EBITDA and EBITDA margin declined by 15% and 340 basis points, respectively due to new customer implementations and currency. On a constant currency basis, managed services EBITDA and EBITDA margin were down 3% and 230 basis points, respectively. Total company gross margin was down 50 basis points, with 20 basis points from the workers' compensation headwind discussed earlier. The other 30 basis points is from a change in revenue mix as the rate of growth among national and on-premise customers has outpaced the growth of small to medium-sized customers, which generally carry higher gross margins. SG&A expense was up $5 million, net of $2 million of nonrecurring integration costs in Q3 2014 or $7 million excluding these costs. The new customer related costs discussed earlier constituted $2 million of the increase and the remaining $5 million from costs associated with the $50 million increase in revenue. This quarter's 39% effective income tax rate was lower than the 28% rate in Q3 last year, which included an increase in expected benefits related to prior year tax provisions. Please note that the adjusted EPS calculation provided accounts for the difference between these rates. Turning to the balance sheet. Q3 finished with $115 million of total debt and a debt to trailing adjusted EBITDA ratio of 0.8. Total liquidity, defined as cash plus borrowing availability on the revolving credit facility, was $225 million. Looking ahead to Q4 of 2015, we expect total revenue growth of about 8%. On a segment basis, staffing services revenue is expected to be up 8% and managed services about 7%, or 9% on a constant currency basis. Adjusted EPS is expected to be $0.58 to $0.64. Based on the adjusted EPS midpoint, this equates to adjusted EBITDA about $48 million or 15% growth. Due to the size of the reserve adjustment to workers' compensation in Q4 of 2014, expense was 40 basis points lower than the current 2015 run rate. On a comparable workers' compensation rate basis adjusted EBITDA growth is expected to be about 20%. We will continue using a combination of organic and acquisition growth to deliver value to shareholders. Organic growth is clearly our top priority due to the strong returns produced by the company's operating leverage. The challenge of finding the right talent is an increasing concern across businesses of all types due to a smaller pool of available talent and widening skilled gap within the pool available. With a rapidly aging workforce, changing demographics and other related factors adding to the challenge, we believe this trend will intensify over the next decade. We like our strategic positioning in the account space and combined with the competitive differentiation of our specialized services, we are optimistic about the prospects for sustainable organic revenue growth in the future. Strategic acquisitions will continue to play a big role in our growth strategy with 18 deals under our belt over the last decade. We have developed a competency of acquiring and integrating talent solution businesses that produce demonstrable shareholder value. With an ample deal pipeline and strong balance sheet, we are very excited about the acquisition opportunities ahead. That ends our prepared comments. We can now open the call for questions.

[Operator Instructions]. Your first question comes from the line of Mr. Jeff Silber of BMO Capital Markets. Please proceed.

Thank you so much. Last night, Amazon announced that they were planning on hiring 100,000 new temporary workers in the fourth quarter. If I remember correctly, that's a business that you typically partake in. Is that's something that's included in your fourth quarter guidance? And if so, which segment within revenues would that be in?

Yes. Thanks, Jeff. Yes, definitely that's an important account for us and their forecast for what they are going to need in the fourth quarter is up and we are going to be able to participate in that increase. And yes, that's in our guidance that we have given and we will work through that. The segment that that's in is our staffing services segment.

Okay. Great. I just wanted to double-check on that. You mentioned the $2 million in new customer related cost this quarter. Can you give us a little bit more color what that is? And is something like that going to continue on an ongoing basis?

Yes. So when we win these bigger deals, whether they be in our outsourcing staffing services on these large implementations of on-site or most of that's related to our recruiting business, PeopleScout, so when we win those deals, we have got to put recruiters in place. And we have got to put that SG&A in place as part of the startup costs. And the larger the deal, the larger that startup cost. So it's some upfront seeding for sure and we have won some significant deals this year and some cost more than others to get started and we have got a couple underway that are going to produce great results next five years under contract. We are going to get a good return on it.

And Jeff, I will add just a little bit more color on that one. Just so you know, that $2 million of cost there, that's both some implementation costs and some co-op cost in acquiring future revenue here. The reason we are calling that out, while we do have those as part of our ongoing model, the two items that we called out or the $2 million that we called out today is in excess of the normal run rate that we would have. So we had some new customer implementations where the business in which we were doing that over on the staffing services side was a bit unique. So we had some extra cost that we might not normally have. And then there were some cost towards the end of the quarter, call it the back half of the quarter in acquiring new customers which there was not any revenue for.

Okay. Great. And then just some numbers related question. What's incorporated in your adjusted EPS guidance for gross margin, SG&A percentage and tax rate? Thanks.

Yes. So I am not going to break it right down that closely, but the adjusted EPS, one of the adjustments in there is a marginal tax rate of 40%. If we were going to talk just about the effective income tax rate, it would be pretty close to this quarter at say 39%, something like that.

Okay. Well, let me ask the question another way. Should we expect gross margin compression? Or should we expect gross margins to expand on a year-over-year basis in the fourth quarter?

We should be pretty close to last year. Even with a little bit of revenue mix that's taking margins down that I talked about this quarter, we do have an upturn going in some of our small to medium sized businesses that might give us some power to get back to year-over-year flat.

Okay. Great. Thanks so much for your help.

Your next question comes from the line of Mr. Randy Reece of Avondale Partners. Please proceed.

Afternoon.

Hi, Randy. How are you doing?

Very nice work.

Thank you.

Wondering if you could update me on, let's say the comparable growth progress of the Labor Ready brand? How you have managed to restore the emphasis on growth there?

Yes. That's come from a combination of two things, large accounts that we continue to get better on in that brand where we are winning those as national deals with very large accounts and then we have implementation plans and guides that gets implemented out in the field. And so about half of that growth is continuing to come from that which has been a pretty good grower over the years. Two years ago, it was really pulling us forward and it got flat there for about four or five quarters. It may have been economic downturn or just a lull in how that went forward. So what's nice is we won some big deals and some of these accounts are going forward again and the implementation is good. The really exciting part is the onesie-twosie business in the local markets is really strong right now and that's providing a good chunk of that growth there. So seeing that Labor Ready business exceed 5%, 6% growth and head towards double-digits is a pretty exciting time for us, since it has been six or seven quarters since we have seen that kind of activity. That brand for us and that service line in general labor and on-demand is often the first to see some economic trouble and maybe that's what we have been working through the last six or seven quarters and we sure like what we have seen in the last eight or 10 weeks. So actually, it maybe even a bit longer than that, 12 or 14 weeks of pretty exciting trends and upturn there. So it just comes from a lot of blocking and tackling and doing the basics out in the field and being staffed right to make sure that those sales team, those operating teams can execute and it's just finding everything clicking all at once and it's really nice. So thanks for that acknowledgement, Randy.

It does seem like you have a higher mix of local staffing business still even with your growth in the national accounts that you have a higher mix of the locals business than some of the other staffing competitors you have. Do you find that anybody else is trying to turn more attention to the SMB market or is that a difficult thing for them to do structurally?

Well, yes. We have 700 local branches and we are proud of those branches. Those branches work on a localized basis and a big chunk of the revenue, probably 75% of the revenue comes from their own efforts in their own little area, that maybe 20%, 25% comes from a national account standpoint. So yes, we have something pretty unique there. And we are introducing technology that allows us to penetrate that further. There are competitors that are coming along and trying to figure how to do the onesie-twosie business in the marketplace. Yet building that branch structure in the way that we have it is, we have got a great head start there and we got great teams with good tenure that are growing. So we just have to keep everybody marching to the right beat of the drum there to make sure that works well every quarter. And we think that we have that. Now we have gotten into the large business. Like you’ve mentioned, some others are already there and our staff management business is doing great on that on-site centralized big account business we are doing very well there also. So having a mix of capabilities to serve large on-sites and have the right team in the marketplace delivering on the smaller accounts is pretty special blend that we feel like we have working well together now.

What we have been picking up in the marketplace is, in the blue-collar labor categories, some increased competition for labor, even at a time when you see some layoffs in certain industries. Do you think that those conditions are, let's say, present throughout the country or just localized to certain markets?

Well, there are certain industries, more than certain markets, that are continuing to suffer and that might make that geography balanced. So manufacturing is still not a category that's growing well. And as you know and we have, over the last three or four years, our largest surprise and pain point has been getting the new housing, getting residential construction growing. And we have some of that moving this summer and we are enjoying that. But back to your question is, why are some people still laying off and others growing. There is a shift. The distribution business is growing and those that run great distribution facilities are continuing to grow. And so goods are still being shipped and moved. Those that are manufacturing are doing so well. And most of our manufacturing business that has done well has been in the food category. But outside of that, it's been a bit tough. So it's a [good] [ph] industry which then would lead yourself to geographies based on where they are located.

Thank you very much.

[Operator Instructions]. Your next question comes from the line of Mr. Paul Ginocchio of Deutsche Bank. Please proceed.

Thanks for taking my question. Obviously revenue growth much better than I feared going into the quarter. Congratulations. Hey Derrek, I want to just maybe disaggregate that seven point acceleration that just occurred. Is it mainly construction, SMB and green energy? What would be the biggest three factors driving the organic growth, if you can break it out? Thank you.

Yes. This is one where it's been so broad-based ball and some of the most broad-based revenue acceleration that I can remember in my 10 years as CFO here outside of a recessionary type of recovery. That said, though I think maybe what I want to call out here is that our green energy and industrial practice did return to growth and that growth added a little over two points to the blended growth of the company. So 6%, call it organic growth, ex that. However, keeping in mind, I would remind everybody that our guidance is still 8% for Q4 this year comparable to what we turned in this quarter. And that's because of the really the acceleration in the small and medium size business really picking up. And we don't expect energy, green energy to be growing at that same rate in Q4.

Great. And I guess we are seeing a lot of macro data, or at least I was looking at a lot of macro data that suggest maybe not as good a growth into the fourth quarter. I guess the only place you are really seeing is in manufacturing. When you talked about the export, there is nothing else really where you are seeing softness. Is that correct?

Yes. That's right. Really, if you know, within all our industry verticals they accelerated really all down every one of them with exception of our manufacturing. Still down, 7%, 8%, kind of consistent with the quarter before Q2, but all industry verticals really have been doing quite well.

Thank you.

[Operator Instructions]. Your next question comes from the line of Mr. Greg Mendez of Robert W Baird. Please proceed.

Hi. Thanks a lot. This is Greg, calling in for Mark. I was just wondering if you could provide a little bit more color around the RPO, you new deal wins in the pipe. It sounds really great. Just wondering if one, you are seeing concentration of demand in specific verticals or geographies? And additionally, what is the, if you don't mind, the implementation timeline when you see that revenue from the recent wins beginning to flow in?

Yes. So, in that RPO space, now it's not any specific vertical we serve. Transportation companies, airlines or big banks are big. We are serving now some distribution and a little bit manufacturing, some retail space. So it's really across the board of industries that we are serving, which is nice. We have heard it before, but it's true. There is reward for talent companies that are needing help in specifics of how to get to it. And these are very strategic sales. When we sell an RPO engagement, they are usually large. They are going to be for, we will take on 1,000 hires a year, but on average they are going to be 5,000 hires or so, upwards to 10,000, even above that, 1,000 people per year, 5,000 to 10,000 people per year. So a couple of these new big deals we have won are in that category, the 5,000 plus and distributed across a large geography. And when that's the case, we have to put recruiters in many locations. This deal is one of the reasons it's a bit unusual on why we did our forecast right is the implementation is a bit different than we had anticipated. And that is, it's the first time they have ever had an RPO and actually the HR department wasn't doing the recruiting and the recruiting was done across very broad geographies. And so we have had to come and build from the ground up and get things moving and show the organization how to interact with us. Those were the longest startups we have. Sometimes when we have a takeaway deal, those startup quickly and we are in the other one is out the revenue matches the speed of onset of the cost. And those are pretty clean and those are projectable. And this one is just abnormal. As Derrek said, a couple of these are just not normal. That's why we called it out. They are going to be a little chunky, but they are going to be -term deals and we are going to get embedded in to these accounts. We are going to hang on to them. We don't lose accounts like this once we get embedded. So there are some investments upfront. They are well worth it.

How much longer would the implementation take in, given that these are slightly different?

Yes. On one of them, we are probably only halfway through. There could be another 500,000 to 750,000 spend this quarter before we really recognize the revenue on that. So we will call this out as we see these, but we have got these forecast now. So the fourth quarter forecast accounts for what we currently see.

Okay. Great. And then, the on-premise business sounds like it is doing really great. Could you give some color around how it's doing ex the large customer there?

Yes. The larger customer is helping out but it's growing about the same as our branch business, about where the average growth is, so off a couple points for the large accounts, but it we are seeing nice growth in our branch-based and our on-site business, on-premise business. So that's exciting for us to see that. And then to get a little help from a handful of large accounts also is pretty nice right now.

Yes. That on-premise business grew mid-teens, 16%. And as Steve mentioned, if we strip out our largest customer, growth in that line of business was 8%, identical to what the company blended average growth rate of 8% was fro the quarter.

All right. Great. That's perfect. Thanks a lot.

Your next question comes from the line of Sara Gubins of Merrill Lynch. Please proceed.

Hi. This is Brent, filling in for Sara. Really nice revenue results and when you are looking at 3Q and your 4Q guidance, it really suggests that you are outperforming, broader staffing trends that you are seeing in BLS and ASA. And maybe can you talk a little bit about what's driving this? Is this new client wins? Or growth within the existing customer base?

Yes. So the BLS, that numbers is a broad-based number. That's including the clerical, healthcare, IT. It's including lots of data in there and we surely correlate with that over time. But it doesn't correlate well on any given day or any given month. Part of that might be that the nature of blue-collar assignments versus some more white-collar and professional positions. As I mentioned earlier in this call, economic period is come and go and we have been in a very expanded period of growth, but it hasn't been robust growth. And so it hasn't taken much of a head stake to cause the economic conditions to falloff and then start back up. The first quarter of 2014, the first quarter of 2015 were economically pretty challenged. And so those periods of time caused blue-collar and these other positions to vary. So you are asking a great question. We challenge it every quarter, every month actually. We look in the distance and try to make sense of it. But what we can do is look at our results and how our performance is branch-by-branch, salesperson-by-salesperson industry-by-industry and the news that we have talked here today is we are seeing some pretty broad-based growth here. So that's nice. And it's not all hanging on customer, one industry. So the sustainability of this right now, as Derrek mentioned a few minutes ago, feels strong as we have seen for quite some time, because of the broad-based nature of what we are working with here. We have been pretty open with you over time, when it's been driven by one customer, one industry. And to find ourselves in the situation we are in now, we are seeing great sustained growth across most geographies and industries is pretty exciting. But that doesn't help with the analysis of how does this relate to the BLS numbers that we see. Sometimes we are getting beat and now we are going to beat it. So that's where we are right now.

Yes. Brent, I think Steve laid out some nice color around that whole topic of the growth, the BLS and some of the strategic causes of the revenue growth. If we maybe break it down one more layer because I know everyone is trying to assimilate what's going on that's really driving the revenue growth as far as operational items we have put in place. Steve hit it really well here on the national sales piece. Our team has done a fantastic job here, both from a service and implementation perspective. Service, meaning put in more robust plans around customer implementations. That's very important for us because on those implementations, many of our national sales, part of a sale is getting us in the door, but they still have to be sold locally. So these more robust implementations is a coordinated effort across our branch network, letting everybody know about the new customer, what their needs are, so that all of our branches better understand that. And likewise around the service, once those are set up, more robust process to understand whether we are really delivering from a service perspective and if not, creating more urgency around that. Second, we are getting a lot more coordination amongst our branches and go-to-market between the different brands. That's helping maybe converting a little bit more revenue that maybe we are leaving on the table that was available. So we put in a revenue dashboard as we were starting the second quarter. It's one of the adjustments we have made, not just from a data perspective, but in the go-to-market strategy. And that has really increased the accountability. It's a cloud tool. It lets everybody all reporting on revenue trends from a weekly perspective by branch, area, industry, pretty much anything you want. And that has really increased the quality of conversations we are having weekly about not just revenue trends but what's going on with the customers behind that. And maybe lastly, just redistribution of resources. We have moved some resources around in the field. We felt that we had some markets where we had more opportunity on the table, but didn't have the right number of sales folks. Some markets where we were short on recruiting and added recruiters over into those locations. And frankly some areas where our branches, because of the consolidations that we did over the last couple of years where the volumes in relation to the headcount there, the headcount was just too low. So there was enough headcount service that volume-based, but maybe not enough to actually go and grow it. So we were still at a headcount level right now comparable to where we were again in the prior year, but we have reduced some headcount coming out of the third quarter last year, changed our go-to-market strategies and approaches which we have talked about here and be distributed that headcount. And I think it's making a difference.

Great. Thank you. That's really helpful. And I guess this is what is contributing to your optimism heading into October, because it seemed like you were suggesting you were getting some acceleration. And are there any specific segments that you are seeing faster improvement? Or more stronger improvement or acceleration into October relative to 3Q?

I think probably the one call out that we make here is, if you had to pick one, because the main things regarding the acceleration is the trends in our small to medium size business, that really started to heat up more towards the back end of the quarter, we will call it the last month and that momentum has stayed strong going into October. And that's a big deal for us, particularly from a sustainability perspective, because that group only makes up, let's call it, about 40% of the total company revenue and over a half of the gross profit dollars. So that's a very meaningful movement forward for us.

Great. Thank you very much.

Ladies and gentlemen, thank you all for your questions. We will now turn the call over to Mr. Steve Cooper for closing remarks.

Yes. We appreciate your time here today and your questions and look forward to updating you as we continue through the fourth quarter. Thank you and have a great day.