TrueBlue Inc (TBI) 2011 Q3 法說會逐字稿

Good day everyone, and welcome to TrueBlue's conference call. Today's call is being recorded. Joining us today is TrueBlue's CEO, Steve Cooper, and CFO, Derrek Gafford. They will discuss TrueBlue's 2011 third quarter earnings results, which were announced today. At this time I would like to hand the call over to Ms. Stacey Burke for the reading of the Safe Harbor. Please go ahead Ms. Burke.

Thank you, here with me today is TrueBlue CEO and President, Steve Cooper, and CFO, Derrek Gafford. They will be discussing TrueBlue's 2011 Q3 earnings results which were announced after market close today. Please note that slides providing additional background on our Q3 results were included in our 8-K filing today. The Company's press release, the accompanying financial schedules, and the Q3 result slides, are now available on our website at www.trueblueinc.com.

Before I hand you over to Steve, I ask for your attention as I read the following Safe Harbor. Please note that on this conference call, management will reiterate forward-looking statements contained in today's press release, and may make or refer to additional forward-looking statements relating to the Company's financial results and operations in the future. Although we believe the expectations reflected in these statements are reasonable, actual results may be materially different. Additional information concerning factors which could cause results to differ materially is contained in the press release and in the Company's filings with the Securities & Exchange Commission, including our most recent Forms 10-Q and 10-K.

I will now hand this call over to TrueBlue's CEO, Steve Cooper.

Thank you, Stacey, and hello everyone. Today we reported that third quarter revenue grew 19% to $371 million, which produced $0.33 per share of net income, above the high end of our earlier estimate. Operating income grew nearly 40%, expanding our operating margin to 6%, 80 basis points higher than a year earlier.

When normalized for the higher credits that expired in 2010, our operating income grew by nearly 50% during the third quarter. On a comparable week basis for Q4, we are estimating revenue growth of about 18%, showing the great momentum we experienced in the third quarter is continuing. On a full-year basis our 2011 operating margins will have expanded about 100 basis points compared to 2010.

I am excited about the ongoing excess that we are seeing here in the beginning of the fourth quarter. Revenue continues to show strong year-over-year growth, and we are holding on to the improvement in gross margins we reported in the third quarter. During the third quarter, we grew revenue across all of our major industry groups and geographic areas. Our capability to deliver industry-specific solutions to national and regional customers, while continuing to value and serve local customers is the driving force behind our strong results. I will discuss our continued success in vertical market selling and service in more detail a little later.

I want to call out our growing presence in the alternative energy and fast-growing niche for us within the construction industry vertical. We have organized and unleashed resources to supply labor for solar and wind energy projects. Our overall growth in Q3 was positively impacted by this opportunity, with almost one-third of our growth coming from these projects.

After Derrek reviews operational and financial details, I will offer some additional remarks. Derrek.

Thanks, Steve. I will start off today with some high-level comments on our third quarter results, and our expectations for the fourth quarter of this year, then we will cover the operating trends for Q3 and key assumptions for Q4. Any reference to our performance is based on a comparison to the same period a year ago, unless stated otherwise. Diluted net income of $0.33 per share was above the high end of our $0.27 to $0.32 expectation. This out performance was primarily due to better than expected results in total revenue, higher than expected gross margin, as well as additional purchases of common stock.

Now let's look forward to Q4 this year. We expect total revenue of $335 million to $345 million, representing growth of about 9%. It is important to note that Q4 this year, and Q4 last year have two unique factors impacting their comparability. First, Q4 last year was a 14-week quarter, due to our 53-week fiscal year in 2010. Second, Q4 this year starts one week later than Q4 last year, by excluding the last week of September, which is one of our highest revenue dollar weeks. Adjusting for both of these items, our expected revenue growth on a comparable basis would be about 18% for Q4 2011, versus the 9% expectation on a non-comparable basis. Shifting gears to our expectations for diluted net income per share for Q4, we estimate a range of $0.12 to $0.17.

Now let's review some of the key operating results for Q3 this year. We continue to experience wide-spread demand across the business this quarter, with revenue growth in all of the major industry groups we serve. Construction grew nearly 40%, but it is important to note that about two-thirds of this growth was from serving the needs of green energy projects, the same types of projects discussed earlier by Steve, versus our traditional construction growth and projects that we have served. The other third of our construction growth was from traditional non-residential construction work, primarily related to remodel work in the retail space and public works projects. But was offset by a decline in residential construction. Manufacturing continued to grow at about 20%, similar to last quarter, and in the other major industry groups we serve we experienced growth in the mid-single-digit to mid-teen range.

Our gross margin for the quarter was 26.9%, which was above the high end of our expected range of 26.8%. It is important to note that our Q3 2010 gross margin of 27% included 40 basis points of non-recurring HIRE Act credits from the 2010 Federal stimulus program. Excluding HIRE Act credits from Q3 last year, gross margin would have been 26.6%, versus the 26.9% reported this quarter. This equates to 30 basis points of fundamental gross margin expansion this quarter. This outperformance was due to disciplined pricing of business at both the local and national level.

Our operating teams have done an outstanding job of using a disciplined approach, and pricing the business based on the value we are able to provide the customers, which has been enhanced by our vertical market strategy discussed earlier by Steve. SG&A as a percentage of revenue was 19.7% as expected, which is 90 basis points lower than Q3 last year. On a dollar basis, SG&A increased about $9 million over Q3 last year due to two factors, first variable SG&A tends to run about 10% of revenue dollar growth over the prior-year period, which equates to about $6 million of additional expense this quarter. Second, about $2 million of the increase is related to the employee-related costs discussed last quarter, by filling open positions and making certain salary adjustments. Operating income this quarter improved by 80 basis points, excluding the 40 basis points of nonrecurring HIRE act credits from our Q3 2010 results, operating income would have increased by about 120 basis points, which really demonstrates the strong operating leverage in our business.

Let's finish our discussion of Q3 by covering a few cash flow and balance sheet items. Year-to-date we generated $16 million of cash flow from operations, versus $14 million in the same period last year. We have funded $70 million of Accounts Receivable growth this year, versus $35 million in the same period last year. The $70 million of funding is related to our revenue growth, and the standard seasonal peak of our revenue dollars in September. Days sales outstanding grew by 3.5 days this quarter, due to our accelerating monthly revenue trends, and a higher mix of larger clients that have longer payment terms.

Accounts Payable and accrued liabilities provided a source of cash of nearly $20 million. Most of the increase in this liability is related to a delay by our insurance carrier to withdraw funds from our new workers compensation trust for claim payments made, which has also created a similar increase in our restricted cash asset. The point here is this timing difference should be rectified in Q4, resulting in a decline to Accounts Payable and Accrueds, offset by a decline in restricted cash with no impact to overall cash flows.

We purchased 3.4 million shares of our common stock for $42 million, 400,000 of these shares were purchased subsequent to the third quarter. We have purchased 4.3 million shares this year for $55 million, with $42 million of availability left under our stock purchase authorization. Our total share purchases this year added about $0.01 to Q3 diluted net income per share, will add about $0.01 to Q4, and will provide additional benefit during 2012.

We also renewed our $80 million asset-backed credit facility this quarter with substantially better terms. This is now a five-year facility versus a prior three-year term facility. Borrowing costs are now about 50% less, including a variety of more favorable terms.

Now let's take a deeper dive into some of the key factors in our Q4 profitability expectation. We expect gross margin to be about 25.9% to 26.4% in comparison with Q4 last year of 26.3%. As a reminder, in Q4 last year, we experienced 20 basis points of nonrecurring benefit from net HIRE Act and payroll tax items. Excluding these items gross margin for Q4 2010, would have been about 26.1%.

For Q4 this year, SG&A as a percentage of revenue should be about 21.7% to 22.7% based on the revenue guidance given today. This equates to about a $2 million step-up from Q3 this year. This is a standard sequential increase for us in Q4, as our bonus plans pay out at incrementally higher levels, and a large part of our marketing material is printed and distributed for 2012. For comparison purposes, our Q3 to Q4 step-up last year was over $7 million. However, the additional week at the end of the quarter added about $3 million of SG&A to Q4 of last year, resulting in a normalized step-up of about $4 million.

Let's cover a few remaining expectations for Q4 2011. We expect depreciation and amortization to be about $4.4 million. We expect about $2 million to $4 million of CapEx. Diluted shares outstanding should be around 40 million. And our effective income tax rate should be about 38% to 40%. Let's finish off with a recap of where we are headed.

We expect strong revenue growth in Q4 of 9%. On a comparable week basis, growth would be about 18%. A strong focus on pricing for the differentiated services we offer will maintain our gross margin momentum. Our balanced approach to SG&A by supporting long-term growth initiatives while using a disciplined approach has been key to growing our top line and leveraging our bottom-line results. Based on our Q4 expectations, operating income growth would be over 60%, which shows the strength of our operating leverage. Our increasing profitability and return of capital through share purchase is contributing to our fundamental focus of increasing shareholder returns.

I will now turn the call back to Steve.

Thank you, Derrek. And before we open up the call for questions, I would like to say a little bit more about our vertical market strategy, which has contributed significantly to our revenue growth. Over the last four years, we have steadily escalated our focus on vertical market selling. This approach is where we have really delivered, and is clearly reflected in our 19% sales growth, and 50% operating income growth this past quarter alone. We have dedicated sales leaders with expertise in specific industries, that we serve using best practices that can be applied locally and nationally.

We have exceptional well-recognized industry expertise in key vertical markets that we serve. These include the construction, warehousing, hospitality, waste, and several other industries that we are focused on. We have built broad expertise in each industry from experience. We know the growth drivers, the opportunities, the challenges in each vertical. We know how to help clients succeed within their own industry, by working with them to apply trends, business processes, standards, discrete needs, compliance rules, documentation, and tracking requirements associated with each customer, in each of the specific markets they operate in. We use this industry expertise to provide specialized solutions, which can differentiate our services by industry, and we have service delivery plans for each key vertical. Not only does this provide us a competitive advantage, it enables us to use repeatable processes that deliver service excellence, which leads to stronger and more loyal customer relationships.

We are establishing a preferred provider position as we grow our customer base in each of these markets. And our sales teams are finding receptive audiences from customers who are interested in our solutions, expertise and experience. All of our initiatives focus on making it easier for our customers to do business with us. It was the strategic initiatives we put into play a few years back that has put us in this very good position. I considered it a journey towards firmly establishing TrueBlue as the leading provider of blue collar staffing, and I am very pleased about where we have been and where we are going.

We have done a good job of integrating acquisitions, and strengthening our existing business. We are working together across the Company, and serving the customer better than ever. It's really a tribute to our operational leadership, our investment and consultative selling, and service-delivery training, and to our ability to recruit and retain talented people who have specific industry knowledge. I want to say a few words about our sales teams, we are seeing some great collaboration from them as we enhance communication and joint planning enterprise-wide.

Our sales teams are increasingly lending their voice and expertise to add value to the industry discussions. I am really impressed with the team work and framework they are using to win in the marketplace. As I said, all of our initiatives serve one purpose, to make it easier for our customers to do business with us. They tell us they want to grow their businesses, to have a ready work force, and for hiring temporary labor to be more convenient. We think there is a tremendous opportunity for us to do even more. We are committed to continuing our investments in our people, our technology, that will allow us to build new capabilities to serve our customers, and to drive further efficiencies that will benefit them. We are embracing new technology and developing creative approaches to serving our customers, that I am convinced will open many new doors for us.

TrueBlue is a stronger company today than it was even one year ago. We are adding value to what we offer our customers, whether they are local or national. The result is revenue growth, and strong cash flow. We are pleased with the strong financial results that our team delivered this quarter, and believe we are well-positioned for the fourth quarter and heading 2012.

Overall, we are in a solid financial situation, and believe we are in a good position for sustainable growth. We are very excited about the future. I will now open up the call for any questions you may have.

(Operator Instructions). And your first question today comes from the line of Paul Ginocchio with Deutsche Bank.

Thanks for taking my question. Just first, it looks like September was particularly strong in your presentation. Is there anything unusual about that? Or it was just a cleaner strong month? And then second, any way to size that exposure to green construction, wind and solar? Is it captured within the 22% construction, or 22% revenue exposure construction, any way to size it within that? Thank you.

Yes, thanks, Paul. Well, September was just continued good momentum from the very things that I have talked about here. This energy, green energy that you have talked about, did pick up some momentum as the summer went on, it has continued to drive great results in September, but across the board we are seeing great results. It is not just driven by that one item. Derrek did you have something further?

Yes, I think Paul asked about the mix of business, and how much green energy makes up of our business, and so our construction mix runs a little over 20%, just for rounding purpose call it 20%. About 5% of that 20% is green energy oriented. It is what we refer to as industrial. It includes some plant shutdown work in there, but about 5 points of our mix.

Great. And just a couple of housekeeping questions. What was worker's comp expense? And then if you can disclose Boeing revenues? Thank you.

Yes, worker's comp expense was 4% for the quarter, and the Boeing revenue was between $27 million and $28 million.

Very impressive quarter, guys. Congratulations.

Thanks, Paul.

Your next question comes from the line of Sara Gubins with Banc of America.

Yes, just a follow-up on the Boeing question. Can you talk about your expectations for Boeing in the fourth quarter?

Yes, we would expect about $25 million. We bumped up a little bit over that this quarter, due to a couple of small unique projects. But $25 million is about what we would expect.

Okay. And can you talk a little bit about the outlook for construction given the strong growth that you have been seeing?

Yes, as we have disclosed here today, a big jump forward in the construction was this green energy, so outside of that, let me talk a bit about that. And as Derrek talked in his comments, most of the other growth was in the commercial area. Remodel jobs of commercial projects, some in the public sector, but mostly I would put it in remodeling retail shops that companies are moving in and out of, and stuff like that. The overall housing market is still slipping backwards. We are not seeing traction in residential, and the other things that come along with that. But general remodel work of older neighborhoods, older neighborhood shopping centers, and things like that, are driving that commercial, those commercial results along with this green energy.

Any reason to think that it is a pent-up demand that might then slow down, or are you getting indications that on the retail side that would continue?

I don't see it that it was a one-shot wonder type thing. It is just gradual improvement in that line of business. If new neighborhoods aren't going to be built, and we are going to be staying put in these older neighborhoods, you will see older shopping centers being remodeled, and retailers are still moving around, the retail business is still pretty shifty, so that creates good opportunity for us also.

Great. And just two quick housekeeping questions. Can you talk about the organic revenue growth, or contribution from A1 staffing, and also just give us the quarter end share count?

Sure. So the acquisition of A1 staffing added about 1% growth to our quarter, so not very much, and then you are asking for the diluted share count was about 42 million for the quarter.

Sorry, and that is the ending share count?

Oh.

As opposed to average, just given that you were buying back stock?

Yes. Yes. Give me a second for that one, Sara. I don't know if I have it here with me.

I can follow-up off line.

Okay. Yes, let me get back to you on that one. I can give you the actual amounts purchased, but I don't know that I have the legal outstanding shares sitting in front of me. I have more weighted average.

That is fine. I will get it later. Thank you.

Okay.

Your next question comes from the line of Jim Janesky with Avondale Partners.

Yes, good afternoon. A couple of questions. Did you open or close any offices during the quarter?

Yes, Jim, we did. We had six and those were almost all Labor Ready, and what we would consider really consolidations for the most part of branches, but they would fall into that strict definition of closed.

Okay. But no openings?

No openings.

Okay. And can you talk about the margin profile of the solar and wind revenues that you have generated?

Sure. It tends to run a little bit beneath our blended average, for two reasons. One, they are larger projects, and that tends to be kind of standard in that industry. And number two, many of these projects are large scale where per diems are involved, which are running through both our cost of sales and our sales which bring the margin down just how the math works, but it is slightly under our blended average.

Okay. And then the last question is part of the growth that we are hearing in the construction area, and why construction hiring has been up the last several months includes apartment buildings going up, because rents are going up, so folks are trying to capitalize on that trend. Are you at all participating in there, or expect to participate in that area?

Well, it hasn't been a big driver of our business yet, Jim. I see what you are seeing, and we have prepped for that, but I think it is in the early stages, and I am hoping that will be a better driver for where we are. But that would be considered for the most part to be in our residential numbers that we have talked about here.

Okay. So you would put that in the residential numbers when it happens. Okay. Thank you.

Your next question comes from the line of John Healy with Northcoast Research. Mr. Healy, your line is open.

Thank you. I wanted to ask a question about the mix of the revenues. It seems like a theme that you guys are moving towards are larger customers, in some verticals that might be a little bit more growthy, but less economically sensitive. I wanted to get your guys' thought if you feel that the revenue profile of the Company today is more sturdy, maybe has a little bit more visibility than maybe it did three years ago. I just wanted to get your opinion. If you believe that, and what we should expect from that going forward?

I appreciate pointing that out and the question. As I discussed in my remarks, we really did build a team to look more at the regional and national player, and in specific industry verticals, and that resulted in us bringing on larger accounts that crossed more geographies, and our mix profile of what we would refer to as a national account versus others. But it is up almost double of what it was three years ago. So however we categorize it, whatever cutoff compared to other companies doesn't matter. But with our own consistent categorization, we have more than doubled our large accounts.

So yes, it is astute what you are pointing out. Is it more stable because of that, I believe so. Those are relationships that we know how to serve. We know their industry. We know their expertise. We have put the right player from our site, or the team if you will, in those situations, and we have found over and over again, that when we have that industry expertise, and we have the right team playing in that right environment, those relationships do stabilize, and is that what we expect out of the future I think it is, absolutely.

But it is also just as important to know we have not walked away from selling in the local market. As a matter of fact we have invested heavily there also. In how to service at the local market, sell in the local market, be a better business consultant in the local market, and the depth that we have pushed sales training, and bringing on better salespeople and better sales coaches all of the way through the organization is very apparent. It is apparent in our results, but it is apparent when you come to meetings within our Company. You see a different Company than you saw three years ago, no doubt.

What does that hold for the future? Well, it is working, so yes, we will continue. We will continue to resource up, make sure that we have the appropriate resources as the customers grow in those sectors. We are very good at blue collar jobs, and we have stayed focused on blue collar jobs. We know how to recruit them and deal with them and handle them, and we see lots of growth opportunities.

Even with high unemployment, there still are a lot of open positions in blue collar jobs. What we have found is with expertise, and with the right consultative process, that filling that skill gap, we have the recruiting resources to do so, so a lot of it was on building the right relationship with the customer, and bringing the right solution to the table, and then us going out and filling that skill gap that exists in America. I look for more of that not less, I look for more ways that we can find access to those that are willing, and able and ready to go to work, and close that skill gap that exists out there, so I think you will see more of it.

I appreciate that. And we look forward to it. I had a question on the margin front. If you look at I guess the pricing or the mix benefit you are starting to get in the business, the 30 basis points or so, it sounded like you felt like you had good momentum on that in the fourth quarter, and I kind of pulled the gross margin guidance apart, and looked at what you are guiding, it appears that it could go up 30 basis points or so, but it might be down a bit on a year-over-year basis. What would cause the gross margins to come in at the low end? It just seemed with the momentum that you implied, that just seems a bit conservative.

We did get great momentum this quarter. That 30 basis points that we talked about, the fundamental gross margin, and you can see it in the slide deck that we have got up on our website, there is no mix issue in there. I mean that is fundamental pricing increase. We have always given a range on the gross margin. We are expecting to maintain that momentum as we go into Q4. So what might cause it to come in a little bit lower would be just a mix perspective. So some of our work in slightly lower gross margin work, or more on the green energy side, just from a mix perspective could bring it in lower, but not anticipating anything from what I refer to as fundamental gross margin, or from the way that we are pricing our business.

Okay. Great. Thank you guys.

Your next question comes from the line of Mark Marcon with Robert W. Baird.

Congratulations on the nice quarter, nice to see the execution of the strategy pay off. I was wondering can you talk a little bit more about what percentage of your revenue at this point you think is coming from the regional and national clients, and what sort of growth are you seeing there relative to local business?

Yes, so as I mentioned when I was visiting a little while ago, Mark, we have to be careful when you all compare that to other companies, because what we classify as a regional or national might be be a different revenue volume than somebody else.

Completely understand.

So just comparing it to ourselves?

Yes.

Inside of our business, the group we call out and treat on a national basis is about 25% of our business. So about a quarter of our business is flowing through the hands of our national team.

Great. And what sort of growth rate are you experiencing there?

Higher than the company average. So there is more growth coming there than the rest of the Company, but it is not like it is dragging all of the growth.

Yes. So if you were up 19%, that part of the business was growing 25% to 30%?

Yes, directionally, yes. Yes. That is a good growth driver for us, those larger accounts. So keep in mind they are filled at the local level. I think you know that. Handling and dealing with it. There is still from the national account handoff to the local delivery team.

It seems like you are still fairly early there, in terms of the way that has been ramping up. In terms of your, if we think about the groups that are actually working on that, how big of a group is that? How much should we think about in terms of additional SG&A investment behind it? How do we think about that?

Oh, we don't break our business down to give cost estimates that way.

I was just trying to figure out if you have been investing behind this, and now it is starting to payoff, and we are going to leverage it, or it is going to be an area of continued investment, so we shouldn't expect a lot of leverage on that particular part of the business. That is what I am trying to get at?

No, I think that drives extra leverage, so it is still filled at the local level, so that is one of the reasons it doesn't drive an extreme amount of revenue. These are larger accounts, it takes less SG&A at the sales and service level to handle the account, but it takes the same amount of SG&A to fill the job out in the field, so there is some extra leverage there. Back to your bigger question of will we remain focused here looking for other verticals, and adding teams and further expertise, the answer is yes. This approach works.

So the technology that we are looking into and implementing all has to do with making sure that our customers are handled at a larger level, that every relationship has the opportunity to turn into a bigger relationship, whether it is being served by more than one branch, or being served by more than one city or more than one state, every customer goes through that filtering process now, and technology is helping us do that, and that is a big changeover for us to be able to treat our customers, as a customer with the opportunity to grow larger by handling more geographies, and that is the name of the game there. So you have industry expertise, but then you also have the ability to grow this one more location at a time for every customer, and you will see more of it. I just can't give you further details about the SG&A grind on it, so --.

Okay. And you were still able to increase gross margins on a like for like basis despite the mix, so is it that you are able to even on these types of clients raise prices? Or is it really a big push on the local side?

Well, it hasn't gone backwards, Mark.

Okay.

The large account, we are able to get the right pricing there, and I think with the mix we have, that is why you saw margins stabilize. If I would have told you that large accounts were driving all of our growth you definitely would have seen margins go down a little bit more. Because the mix as a whole, a larger account does have a slightly lower margin, but with the mix of growth at the local level, the national level, and all other components that we spoke about here today, that is why margins are holding fairly stable.

One other way to look at it, is we are seeing pretty consistent growth overall avenues of our business. And that is where we start this message today, is very consistent growth across all geographies. All industries, and with that kind of consistency, margins can hold pretty stable. If one of those sectors or large accounts start growing faster than small, then you would see that to start showing up in a margin mix swing, and you are not seeing that right now, nor are we forecasting it currently.

If I could just jump in there and add one thing to that Mark, as Steve mentioned talking about the difference between the local and the national level here, he pointed out that a big part of our growth this quarter was construction, and two-thirds of that construction growth was in the green oriented construction, which definitely gave us a nice push of revenue. If we carve that off to the side though, our revenue growth and on the best thing to probably take our Labor Ready brand, our revenue growth at the national level, and at the local level has been very consistent between those two. It has been higher when you throw in some of this alternative energy, but carving that aside, it has been very steady growth rates between the two, as has been the margin pickup that we have talked about between those two, so there is not a mix issue going on here. We have been increasing gross margin at both the national and local level that has been driving that 30 basis points that we talked about earlier.

Great. And then can you, just the worker's comp accrual reversal, what was that for this quarter?

It was right in between 80 and 90 basis points, I think, of revenue. Just so everybody is clear on this what we are talking about is, was there any reversal of liability related to worker's comp in prior periods which helped facilitate or ramp through our gross margin? The answer is yes. And as a percentage of revenue, that was between 80 and 90 basis points. I think it barely made the round to 90 basis points.

And how are you thinking about the [Souda] for next year?

We are right in the middle of it. We haven't got anything laid out, and it is early, so I would say this, our plans on how we plan to go to the market, address the market, communicate with customers and our employees is nailed down very well. We started on this in August, so our plans on that side are very tight. Now we start getting into the projection process, which right now is in the very early innings, so I would be guessing at the amount right now.

Okay. And then finally, just can you talk a little bit more about these green projects, just what is the size, scope, length of assignments? How durable are they? How should we think about that?

Well, they are projects, so that is the first place to start. It is not like it is a manufacturing facility that the work is going to go on forever. The environment is good for them right now. The investment in projects is strong, and we surely have great relationships there, so it is continuing. It is growing. It is making good movement here in the fourth quarter, but by no means do we want to send a signal that there couldn't be some volatility with it. It could be driven heavily by tax credits, so we have got our eye on that.

The nice part about it is we haven't had to over invest in a lot of infrastructure, because we are filling these jobs through SG&A that already existed. So there is not a lot of risk to the organization. We like the service, and we are looking to push it further, and let's hope that it continues here into the future. It has got some political ramifications with it, but right now everyone is saying we need more alternative energy, so we see it as a very growing sector, and if I had to make a call out on it, it might be choppy over the next year or two, but this is a sustainable avenue, the energy market that we are learning how to serve.

Great. And then can you just talk about the longer-term prospects for Boeing? Because that has held up in the second half of this year, better than the way it was discussed previously. And were there any temporary bumps just because we got so close to the end? Or how should we think about it?

Yes, there is a little bit of what you just said. It was a good quarter because there was some push to get that delivery done, and we got a little push there, but there is a pretty consistent flow of work, and so it may not be at the highest level there, but we have given you a $20 million to $25 million range per quarter, and we believe we can hold up on that through the next year.

Great. Congratulations.

(Operator Instructions). Your next question comes from the line of Jeff Silber with BMO Capital Markets.

Thank you so much. Can you hear me?

Yes, we can, Jeff.

Alright. Wonderful. Just focusing on the margin side a little bit more, can you just talk about bill rate and pay rate trends in the quarter?

Yes, we haven't given out that percentage just on a bill rate or pay rate percentage because of a couple of things. One, the changes in our mix can really distort that. As can the fact that our work in PlaneTechs, and some of these larger solar projects have per diems in them, so they are running through the bill rate but not the pay rate, so it can be distorted. However what I would say is that the bottom line is that 30 basis points of margin expansion that you saw from us is all about bill and pay rates widening, and this 19% revenue growth, 18% on an organic basis, almost all of that is from billable hours growth. If we were to normalize things down, we might be around a couple, 2% to 3% on a normalized basis and bill-rate increase, but most of this revenue growth is on increased billable hours.

Great. That is helpful, Derrek, I appreciate it. You talked a bit about the go-to-market strategy, and focusing on some of the regional and national accounts. I know it is completely different than the way a lot of the other companies define it out there. But most of them talk about more competitive pricing pressure as they move to the larger accounts. I was wondering if you are seeing the same thing?

We are not, because it is so different, the way we define a vertical, or we define a large account is different. It doesn't mean we have got free rein to raise prices, and it doesn't mean that it is not competitive. We have just found we have had a lot of success in this strategy of bringing expertise to the table. So it has been able to hold our position, so what you are hearing is correct. There are plenty of people bidding, but we have held ourselves out as something different. So that helps in that conversation.

That is great to hear, and just one final one. Steve you mentioned some of the vertical markets that you are in. Are there any markets that you are not in that you think you might enter over the next year or so?

Well I don't have one on my mind that I am ready to state, what I can say is every opportunity is being looked at. And if we can add the right amount of resource for it, we are going to add it. Whether that would be learning how to handle venues better, handle security better at large venues, anyplace where there is a need for people to service an event, or service something is an area that we are highly interested in. But I can go down the list of other specialties to say needs appear. When I made the comment earlier that every customer is a filter for us, we learn so much when we are serving our customers properly, when we are asking the right questions, and we are in the proper discovery mode, we are learning about the industry.

We are learning about how they buy, we are learning about what they need, and what makes them successful, and the process that we have in play with great teams, and now organized into vertical teams that share these great expertises with each other, that applies, and then all of a sudden it just takes just one customer that has a need that grew, and then we can go impact it pretty soundly. So it is more of a process that we have built, and with eyes wide open, the answer is absolutely yes, we will be serving more verticals in a year than we are right now.

That is great to hear. Thanks so much.

Your next question comes from the line of Paul Condra with BMO Capital Markets.

Hey you guys, thanks. Just a couple of really quick ones. Can you give the monthly organic sales trends for the quarter?

Yes. I mean, we have got in our slide deck kind of what the monthly revenue trends are. We don't split out organic versus inorganic, just because it is so immaterial. But for those of you that don't have those with you, July was up 18%, August was up 17%, September was up 21%, and for the quarter, our A1 acquisition drove about 1% revenue growth. So you can probably back about a point off of each one of those to get to, if you wanted to get to organic monthly revenue growth trends, but we haven't split it out. Just due to immateriality.

Okay. And then just the ending office count?

Yes, it was I think 695, but let me double check before -- 595, excuse me.

595. Okay. Thank you very much.

Hold it. Hold it. Hold it. Hold it. Hold it. That was Labor Ready brand. 718. If we were down to 595, we would be in some trouble.

Ladies and gentlemen, this does conclude the question and answer portion of today's conference. I would like to turn the conference back over to Steve Cooper for some closing remarks.

Thank you. We really appreciate everybody joining us today. Your attention to questions are appreciated, we look forward to reporting the results of Q4 to you, as we continue to drive industry leading growth. Our excitement is growing as well. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude our presentation. And you may now disconnect. Have a good evening.