TrueBlue, Inc. Price & Performance (TBI)

It is now my pleasure to turn the call over to Terrence Owatt, President and Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome everyone to today's call. I am joined by our Chief Financial Officer, Carl Swisse.

We appreciate you being here with us. 2024 was a challenging year and I'm incredibly proud of how the team navigated with agility and discipline. Our teams are doing tremendous work as customers seek improved market confidence before making significant adjustments to their workforce strategies. Uncertainty and caution continue to weigh on the staffing industry with reduced business spend and curved hiring trends, but we remain focused on the areas we can control. Our teams are staying highly engaged with clients to address their immediate needs with short duration and flexible solutions while also ensuring we are well positioned to support demand as needs expand. For example, our on-site business stepped in to serve as a supplemental staffing provider for an international transportation and logistics company and driven by the team's exceptional service, we have expanded to serve as their primary staffing provider in four locations and their sole provider into additional facilities. Another example comes from our commercial driving business, where a long standing customer requested our exclusive partnership to service their new account with a Fortune 50 technology company. Resulting in our expansion to 10 additional sites across the Midwest, These examples demonstrate the strength of our client relationships and the agility of our teams in meeting today's needs while also creating opportunities for growth. 2024 was also a transformative year for Trueblue.

As we made significant progress executing on our strategic priorities and positioning the company for strong growth and expanded profitability when customer demand volumes return. We achieved a critical milestone in the digital transformation of our business with the launch of our new proprietary JobStack app, allowing us to control our roadmap and continuously expand the value we bring to our customers and associates. We also delivered strong performance and attractive skilled markets including commercial driving and energy work, and we made notable progress diversifying our RPO business in attractive verticals such as healthcare, and higher skilled professional placements. Our actions to simplify our organizational structure including the sale of our on demand labor business in Canada, and consolidation of our on-site and global leadership structures, strategically position us to better leverage our inherent strengths as we look to capture growth opportunities ahead. As we turn to 2025, we remain committed to capturing market share and enhancing our long term profitability through clear strategic priorities focused on top line growth and margin expansion, as you may have seen, we are off to a fast start. We will continue to advance our digital transformation with a focus on enhancing the user experience Our proprietary technologies, including JobStack and Affinix, allow us to accelerate innovation, and implement enhancements quickly address evolving user needs.

For example, we recently introduced AI assisted on demand digital interviewing and self scheduling using our Afinix technology which has shown to reduce processing times up to seven days while JobStack's latest Ready Match technology instantly matches job requirements with a pool of reliable, qualified individuals making it easy for customers to invite the best fit workers to the job and opt The digital transformation of our business positions us to drive growth and expand our reach by combining our expansive market presence and expertise with our proprietary technology to deliver a more customized, differentiated experience.

We are also focused on expanding our presence in high growth and underpenetrated end markets as well as high value roles to capitalize on secular growth opportunities we continue to improve our strong position in skilled trades with our skilled staffing businesses outpacing the broader market in recent years, as well as our work up and apprenticeship programs, providing skill development opportunities for workers to build careers in skilled trades while bolstering our talent pool to fill critical market gaps. We have additional opportunity to drive revenue expansion with our growing momentum in healthcare and professional services. Our recent acquisition of healthcare staffing professionals marks a key milestone in advancing our strategic expansion in the Healthcare space. We are excited to welcome HSP to the Trueblue team we look to realize untapped growth potential and enhanced value by combining their expertise and fast growing roster of long term clients, with our significant footprint. Technology and recruiting agility. Our PeopleScout team also recently announced a landmark talent advisory win having been selected as a delivery partner to provide employer brands and Canada attraction services for the U. K. Armed Forces, further expanding our presence in the government sector. With the traditional end markets we serve poised for growth, and our continued expansion in underpenetrated markets, we are well positioned for a strong rebound and accelerated growth.

Another key priority ultimately accelerate our growth and improve profitability. We have simplified our organizational structure to eliminate silos and create efficiencies that brought our teams closer to each other and to our customers resulting in increased synergies in cross selling. For example, our PeopleReady and PeopleManagement teams recently won a joint pursuit serving a global environmental services company to staff temporary warehouse positions as well as long term supervisor, [indiscernible] administrative roles which speaks to the strength of our teams as they work closer in collaboration. Looking forward, we are focused on new and differentiating ways to enhance growth and capture demand. For example, PeopleReady, we are aligning our on demand organization into territories working in collaboration to grow our customer base. Sales representatives will be added across the country to implement targeted sales strategies in each territory and by the end of the summer, we will have increased the number of field sales representatives by 50%.

The addition of dedicated sales representatives combined with focused responsibilities for both operations and sales, and complemented by the digital capabilities of our JobStack app, is expected to improve results across our on demand field network. We will make this investment in a cost neutral way to create a more simplified structure, Optimizing our business model allows us to better leverage our strengths and assets to deliver long term profitable growth. While current labor market dynamics are challenging, evolving workforce needs and structural staffing shortages create compelling opportunities for our business. The long we are managing through the cycle with the discipline and agility needed to ensure we are strategically positioned for strong growth and profitability, [indiscernible] We are excited about the opportunities ahead and are confident our strategic priorities in combination with our many strengths and assets will enable us to advance our mission to connect people and work while delivering long term shareholder value.

I will now pass the call over to Carl who will share further details around our financial results and outlook.

Thank you, Taryn. Total revenue for the quarter was $386,000,000 a decline of 22% with six percentage points driven by the extra fourteenth week in the prior year. Resulting in a 16% decline on a comparable thirteen week basis. As expected, temporary labor and permanent hiring volumes continue to be suppressed as clients remain uncertain of their workforce needs and cautious around business spend. While these factors led to overall softness in market demand, our teams continue to capitalize on growing verticals. For example, our commercial driving services delivered double digit growth for the second consecutive quarter and our PeopleScout team continued to outperform prior year in new business wins. Especially in professional roles.

Gross margin was 26.6% for the quarter, up 50 basis points. Lower workers' compensation costs driven by favorable development of prior year reserves contributed 170 basis points of expansion This was partially offset by changes in revenue mix, with more favorable trends in our lower margin PeopleManagement segment, as well as a decline in our highest margin business PeopleScout. Which drove a decline of 80 basis points. Pricing pressures consistent with the current market environment contributed another 20 Trueblue and software depreciation now reported in cost of services drove another 20 basis points of decline. Keep in mind software depreciation is non cash and We reduced SG and A by 18% as we remain disciplined and committed to enhancing our profitability. With the transition to our proprietary JobStack app, we accelerated the recognition of third party software licensing fees associated with the previous version. Resulting in 6,000,000 of additional non cash expense in the fourth quarter. This accelerated expense as well as other costs associated with upgrading our legacy PeopleReady technology are excluded from our adjusted net income and adjusted EBITDA calculations. On an adjusted basis, reduced SG and A by 24%. Outpacing our revenue decline we continue to focus on areas we can control.

While our profitability can traditionally expand quickly, as revenue grows, our lean cost structure and improved efficiencies mean that we are even better positioned to deliver enhanced profitability as the demand environment rebounds.

We reported a net loss of $12,000,000 this quarter, which included $2,000,000 of income tax expense, primarily associated with our foreign essentially zero income tax benefit on U. S. Operations due to the valuation allowance and effect on our U. S. Deferred tax assets. As a reminder, the valuation allowance has no impact on our operations, liquidity or debt covenants. Adjusted net loss was 1,000,000 while adjusted EBITDA was positive 9,000,000 Now let's turn to the specifics of our segments. PeopleReady revenue decreased 21% on a comparable thirteen week basis. Which includes two points of decline from the sale of our on demand business in Canada.

The extra fourteenth week in the prior year contributed six points of additional year over year decline. Resulting in reported revenue decline Lower client volumes continued across most verticals and geographies. We have yet to see a meaningful shift in our overall sequential trends, but we are encouraged to see momentum building in skilled trades an improvement to underlying trends as we exited the quarter. PeopleReady segment profit margin was up 80 basis points largely driven by favorable workers' compensation reserve [indiscernible] which were partially offset by lower operating leverage as revenue declined. PeopleScout revenue decreased 30% on a comparable thirteen week basis.

Which includes eight points of decline from the client loss we discussed last quarter. The extra fourteenth week in the prior year contributed one point of additional year over year resulting in reported revenue decline of 31%. We saw reduced client volumes as businesses continue to navigate challenging market dynamics. Customers are hesitant to make significant adjustments in their workforce strategies as they face cost pressures and uncertainty around their workforce needs. While these factors led to subdued client volumes, our teams continue to outperform in new business wins. And we expect these relationships to drive further revenue expansions as customers' hiring volumes return. PeopleScout segment profit margin was down two twenty basis points due to the lower operating leverage as revenue declined. People management revenue decreased two with the extra fourteenth week in the prior year year over year decline. A reported decline of 9%. The decline in demand was driven by lower on-site client volumes, consistent with the macro conditions in the verticals we serve. This was partially offset by continued strength in our commercial driving services, which delivered its second consecutive quarter of double digit growth. PeopleManagement segment profit margin was up two twenty basis points primarily due to disciplined cost management actions to drive improved Now let's turn to the balance sheet.

We finished the quarter with $23,000,000 in cash $8,000,000 of debt $119,000,000 of borrowing availability. We have diligently balanced strategic investments and returning excess capital [indiscernible] maintaining a strong liquidity position to pursue growth opportunities. This focused capital strategy enabled our recent acquisition of healthcare staffing professionals. Where we leveraged our strong balance sheet to take on a modest amount of debt at attractive terms to capitalize on the strategic opportunity. Healthcare staffing professionals or HSP was purchased on January 31 for $42,000,000 the possibility of an additional $14,000,000 of consideration, if favorable results are achieved over the next two years. We expect the HSP business to produce segment profit of $5,000,000 to $7,000,000 over the next twelve months, which corresponds with a forward looking multiple of six to eight times.

We're excited to bring HSD into the Trueblue portfolio as we work together to accelerate growth and enhance shareholder value. Turning to our outlook for the first quarter. We expect a revenue decline of 13% to 7%. This includes one percentage point of headwind from the sale of our on demand business in Canada, offset by three percentage points of inorganic growth from the acquisition of HSP. Our outlook reflects a continuation of current market trends because while there are encouraging signs for the New Year, we've yet to see a definitive indication as to when overall demand trends [indiscernible] We expect SG and A of $93,000,000 to 97,000,000 represents an improvement of roughly $12,000,000 compared to the prior year period as we manage through this market cycle with a commitment to enhance our profitability and to ensure that we are well positioned as conditions improve. Additional information on our outlook can be found in our earnings presentation shared on our Web [indiscernible] Before we open up the call for questions, want to turn it back over to Terrence for some closing remarks. Thank you, Karl.

As you have heard from us today, we remain committed to advancing our strategic priorities and managing through this challenging market cycle with the agility and discipline needed ensure we are positioned to capitalize on the growth opportunities ahead. We are confident that we have the right people, technology and resources to drive our strategic priorities forward enhancing shareholder value, and advancing our mission to connect people and work. This concludes our prepared remarks.

Operator, please open the call now for questions.

Our first question is from Will Brunei with Northcoast Research. Please proceed with your question.

How's it going, guys? Hey Will. Hi Will.

So congrats on the HSP acquisition. I was going to ask your press release referred to HSP as High growth And I was wondering if you could tell us a little bit more specifically about your growth has looked like in recent years and how the pressures that are in the healthcare industry as experience plays into expectations.

Thank you for the question, Will. We are thrilled to welcome the HSP team and customer base to TrueBlue. Although the healthcare staffing market has seen some pressure over the last couple of years, an aging population and secular growth offer long term potential opportunities making health care an attractive end market for Trueblue that we're excited to participate in. HSP has outperformed the expansion and contraction and we feel really good about their ability to continue that trend. They have long term clients, many of which are in the government and edge educational sectors, which typically provide more stability through various market cycles. And then finally, HSP's strong track record and niche service in the healthcare space opens doors for us at TrueBlue to expand into new markets, while at the same time, our geographic accelerate HSP's potential growth opportunities.

And just to add a little on to there too as you're talking about revenue, we put this in the investor deck as well. But just over the next twelve months, we'll have about eleven months of impact in 2025 will, but we think anywhere between $75,000,000 and $85,000,000 of revenue and about $5,000,000 to $7,000,000 of EBITDA really in the high single digit margins higher than our traditional staffing businesses today. Okay, great.

All right, I just have one more for you.

If you could provide some more details about the U. K. Armed Forces contract, the revenue potential, the length of the contract and the margins as well. Yes. Thanks, Will. We're very happy to report that people Scouts talent advisory team secured what is a significant new wins to provide employer brand and Canada to attract several delivery partners for Serco, which is an international provider of government services. And this is part of a multiyear contract. The scope that we have here includes their recruitment marketing to fill the pipe [indiscernible] Forces. If you think about the British Navy, Royal Navy and the Royal Air Force, are included here. 2025 and 2026 will be transition years.

With implementation work where we will see some revenue, but the full service of the contract will begin in 2027. It's a seven year contract with an option to extend for an additional three years after that initial period. In terms of deal size, we expect them to be one of our top clients within PeopleScout. There's some media revenue within scope, which comes at a bit of a lower margin, but the deal will be certainly a contributor to bringing PeopleScout back to double digit segment [indiscernible] All right, great. Thank you guys. I appreciate it.

Thanks Will.

Our next question is from Mark Marcon with Baird.

Good afternoon and thanks for taking my questions.

I'm wondering with regards to the PeopleReady business, can you discuss any sort of regional differences that you're currently seeing? Any signs of improvement? We've certainly seen small business confidence in the indices improve. Just wondering if you're seeing any of that translate to revenue at all That's the first question.

Thanks for the question, Mark. Yes, let me just talk kind of revenue trends so far and then I'll let kind of Terrence add some color in there as well. As you kind of know, our largest geographic opportunities, California, Florida, Texas, right? That's about a third of PeopleReady's trailing twelve months revenue. Our trends in California, Texas were pretty closely aligned to what we're seeing in our end markets.

But we're seeing some improved trends in [indiscernible] during Q4 and we've also seen kind of some bright spots in specific markets. That have not been impacted by weather throughout the country.

If I could add to that Mark, we are encouraged by some positive trends that we're seeing within PeopleReady here in the New Year. Where weekly sequential revenue trends have improved in February after a slow start in January. Which was really impacted by the holiday as well as some significant weather that we've seen. Also important to note that we're seeing some increased growth in our southern border states. Along with a handful of other pockets around the country. We believe that the focus on migration issues with the new [indiscernible] Our teams in those areas are reporting that our clients are experiencing some high absentee rates. And turning to us to fill those jobs. So So it's a couple of weeks of data, but we're certainly encouraged by those signs. Karen, could you expand on that a little bit just in terms of how widespread that is and how much of a fall benefit you're getting in some of those particular regions?

Let me maybe I'll just add on this one first, Mark. Look, I think it's from a it's first couple of weeks of February, right? They're back kind of in line with sequential trends, which is a good thing after we talked about kind of that weather and holiday impact in January. From an outlook standpoint, I'd say, hey, if we see this continue, there could be some upside to outlook I think it's still too soon to call this a trend. As you know, what we're seeing it's hard to it's only a couple of weeks in the February Okay. And then speaking of things that have been in the news, obviously, there's been tragedy in Southern California.

Parts of Western Carolina are still dealing with all sorts of issues. You see any sort of pickup in terms of business, in terms of remediation of those [indiscernible] are you not participating in that?

Yes. Thank you for the question, Mark. We are participating in that. Our PeopleReady business provides on demand support in in in North Carolina and Florida. And in California, we have started the work now. We're working with 14 different organizations that are focused on those cleanup efforts. And we would expect in the up coming months in California as construction plans are approved and permits are awarded that people already skilled trades will play a role in the restoration and rebuild there in California. As we are in Florida and North Carolina.

Great. And then any sort of commentary from from an industry perspective in terms of areas of particular strength or weakness, particularly as it relates to PeopleReady?

I'd say one thing just as the skilled business for us continues to be a bright spot, right? We talked about this a little bit in prepared remarks as well, but what we're doing in energy and then I'd also say too from an end market. So I think transportation and distribution not just in PeopleReady, but across the portfolio for us has been doing better in in Q4 and we've got a good foothold in that market and industry and expect for that to continue for us.

Great. And then just lastly, on the SG and A, you did a nice job in terms of reducing your SG and A expenses. Can you talk a little bit about the actions that you ended up taking Is that something that we should expect to stabilize as the year unfolds or how should we think about that?

Yes. Thanks for the question on that one too, Mark. So we did, we over performed a little bit of what our guidance was here in Q4, I think by probably a point. I think our adjusted SG and A was expected to be about down 23% and we ended up being down 24%. It's important to note that there was from a GAAP basis just about $6,000,000 of third party software licenses that hit in Q4. That will be non cash in Q4 and adjustment to EBITDA. But as you're thinking about the longer term, we've guided to about a midpoint of $95,000,000 which down about 11%.

That includes about $1,000,000 of SG and A for our HSP acquisition.

I'd say as we kind of look forward to the year, we'll make some select investments as we find some opportunities for growth, but nothing material. So I think that's a pretty good run rate from a cost standpoint. You also asked just kind of where these have been. Similar to what we've talked about. This is about simplifying the organization, not where necessarily our field teams are closest to our customers and our associates. Really looking at kind of support structure and others that we've mentioned, where we're taking action.

If I could just add to that, one of the opportunities that has come from this is our ability to realign our PeopleReady on demand organization into sales territories in a cost neutral manner. So each of our territories will be under single leadership with a dedicated sales representative here moving forward. Those territories are going to be comprised of one branch or multiple branches. Working together to grow our customer base. So if you think about we have four eighty branches today, those will be organized into three sixty territories as we move forward and we will increase our sales headcount out in the field by 50% by by midsummer. And again, some of the cost actions that we took have enabled us to do this.

Great. Thank you. Thank you, Mark. Our next question is from Jeff Silber with BMO Capital Markets. Please proceed with your question. Hey, it's Ryan on for Jeff. Just to start off with a quick numbers question.

Wondering if you could quantify the revenue guidance by the different segments and then also if you had the exit rates coming out of the quarter? Yes. Thanks, Ryan, for the question. So I'm going to just give kind of the midpoints here, right? We were minus 13% to minus 7%. From a Trueblue standpoint at the midpoint of minus 10 for True Blue. It's important to note that that includes a positive three point impact due to the acquisition of HSP at the January. But the midpoints for each one of our segments PeopleReady down about 16% people management down 3% and PeopleScout down 27%. Just another a couple of two other reminders in there, our Canadian divestiture head headwind for both Trueblue and PeopleReady and we're going to lapse over those And then also the hospitality client loss that we discussed headwind for True Blue and about eight points for PeopleScout, which will lapse those comps as we exit Q2 as Got it. Thank you very much. And then then just piggybacking on one of the prior questions, I was curious if you're seeing material impact yet from some of the Trump policies regarding deportation? And then if you have any outlook on how that might kind of trend as we progress through the year?

Yes. Thanks, Ryan. In addition to what I talked about earlier related to the PeopleReady business and some of that demand that we're seeing due to increased absentee rates. We have customers across performing internal audits to ensure that their workforce complies with the current regulations. Many customers and prospects are increasingly looking to True Blue to ensure they have a workforce that's authorized to work in The United States. And this has led to some of the new win momentum that we're seeing particularly in our on-site business. Just a note, in our on-site business, we've actually closed more deals in 2025 than in all of 2024. And we think that this focus on ensuring that the workforce is meet the policy is contributing to that.

And maybe just to add on to that one too, Ryan, just from a kind of a tariff perspective, In the short term, look, we don't know how this is going to play out, but there could be some increases in input costs, other supply chain challenges that might affect some labor needs for our customers. But just as a reminder, True Blue's got about 25% exposure across our brands in manufacturing and this is what we're geared to support is onshore manufacturing here. And so we feel good about the long term nature of where we're positioned and what that ultimately could do for our business. Understood. Thank you very much. Thanks, Ryan.

Thank you. Our next question is from Mark Riddick Please proceed with your question. So I wanted to touch a little bit on the acquisition and congratulations on on HSBC. I wonder if you could touch a little bit more both on attractiveness of the healthcare market, which seems encouraging. I think also there's a regional mix component that's expected to be beneficial.

And then maybe on a broader scope, you can maybe spend a little time on thoughts around the current maybe what the acquisition pipeline looks like within the space and maybe levels of at this point.

Yes, thanks. So we're excited about this. One. Thanks, Mark. I'd just add this, right, HSP is going to be immediately accretive to our We took on a bit of debt here on a variable term loan that will carry anywhere from 6% to 8% interest.

So think about a couple million dollars $2,000,000 to $3,000,000 of interest expense a year.

And this business should be able to generate anywhere between $5,000,000 and $7,000,000 of EBITDA. Also just from a kind of a synergy standpoint, this is all this would all be kind of upside to our kind of initial valuation. We think that there's a lot of opportunity with our expansive recruiting network, within our PeopleScout business help assist and fill their exclusive open orders. In the longer term, we think that there's some opportunities to joint bid on non healthcare roles, so think what we're really good at in our people ready business, janitorial and cafeteria type works, with their current and future prospects.

And I'd also say just from a cost synergies perspective, anything that we'd be able to save here, really the intent would be And into additional investments in growth resources to help accelerate the growth trajectory that HSP is experiencing.

Great. And then I was wondering if you could spend a little time talking about the progress you're making with the JobStack rollout? Thanks. Yes. Thanks for the question, Mark.

As you know, last year, we successfully rolled out our new proprietary JobStack app, which really positions us well to control our roadmap and ensure that we are addressing the needs of our users. Our roadmap for 2025 includes significant enhancements really designed to increase operational efficiency, improve sales effectiveness and drive revenue growth. By delivering just a continued customer experience. Just a couple of things that that I'll call out that have been successes so far. One, we rolled out our ready match technology within JobStack that instantly matches Job requirements with a pool of candidates and makes it really easy for both our customers and our field to invite best fit workers to the job. We launched our digital onboarding experience that allows our candidates to quickly join our workforce. We're also able to now onboard customers in a completely digital manner if that is the way in which they choose to engage with us.

Our customers are able to enter orders in a digital manner and have immediate access to our associate base. And finally, we've also added a customer associate referral program. That allows both our customers and associates to refer to PeopleReady.

Excellent.

Thank you very much.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Terrence Owen for any closing comments.

Thank you, operator, and thank you everyone for joining us today. I want to take another moment to welcome our newest colleagues at HSP to the Trueblue Blue team. We're excited to have you on board and look forward to working together. I also want to take this opportunity to thank the entire Trueblue team for their tremendous efforts in providing our customers and associates with exceptional service and their dedication to advancing our mission to connect people and work. We look forward to speaking with you all at Up upcoming investor events and on our next quarterly call.

If you have any questions, please don't hesitate to reach out. Have a great evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.