TrueBlue, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the True Blue third quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Derek Gafford, CFO, Thank you. Please go ahead.

Good afternoon, everyone, and thank you for joining today's call. I'm joined by our Chief Executive Officer, Patrick Burrell. Before we begin, I want to remind everyone that today's call and slide presentation contain forward-looking statements, all of which are subject to risks and uncertainties, and we assume no obligation to update or revise any forward-looking statements. These risks and uncertainties, some of which are described in today's press release and in our SEC filings, could cause actual results to differ materially from those in our forward-looking statements. We use non-GAAP measures when presenting our financial results. We encourage you to review the non-GAAP reconciliations in today's earnings release or at TrueBlue.com under the investor relations section for a complete understanding of these terms and their purpose. Any comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated. Lastly, we will be providing a copy of our prepared remarks on our website at the conclusion of today's call. A full transcript and audio replay will also be available soon after the call. With that, I'll turn the call over to Patrick.

Thank you, Derek, and welcome everyone to today's call. Total revenue from the third quarter was down 25%, and we posted positive net income of $9 million, or 25 cents per share. We are very pleased that the company has returned to profitability. We've taken the right actions to restore profitability and position the company for long-term growth as the economy recovers. During the third quarter, we saw steady improvements in our revenue trends across most of the industries and geographies we serve. our cost management actions continue to show meaningful results, which helps position us for stronger incremental profit margins when revenue growth returns. Now, let's turn to our results by segment, starting with People Ready. People Ready is our largest segment, representing 61% of trailing 12-month revenue and 76% of segment profit. People Ready is the leading provider of on-demand labor and skilled trades in the North American industrial staffing market. We service our clients via a national footprint of physical branch locations, as well as our Jobstack mobile app. PeopleReady's revenue was down 29% during the quarter, and we saw intra-quarter improvement with revenue down 27% in September versus down 32% in July. People management is our second largest segment, representing 30% of trailing 12-month revenue and 15% of segment profits. People management provides on-site industrial staffing and commercial driving services in the North American industrial staffing market. The essence of a typical people management engagement is supplying an outsourced workforce that involves multi-year, multi-million dollar on-site or driver relationships. These types of client engagements tend to be more resilient in a downturn. Revenue for people management was down 8% during the quarter, with top line down just 2% in September versus down 12% in July. Turning to our third segment, PeopleScout represents 9% of trailing 12-month revenue and 9% of segment profit. PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing and manned service provider offerings. Revenue was down 48% during the quarter versus down 53% in Q2. PeopleScout results were particularly impacted by exposure to large travel and leisure clients. Now I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady. Our long-term strategy at PeopleReady is to digitalize our business model to gain market share. Most of our competitors in this segment are smaller mom and pops that don't have the scale or capital to deploy something like our Jobstack mobile app. So this along with our nationwide footprint, is what makes us unique. We began rolling out Jobstack in 2017 to our associates, and in 2018, we launched the client side of the app. We now have digital fill rates north of 50% and more than 26,000 clients using the app. In Q3 2020, we filled 726,000 shifts via Jobstack, representing a digital fill rate of 51%. Our client user count ended the quarter at 26,100, up 37% versus Q3 2019. In mid-2020, we introduced new digital onboarding features that cut application time in half. This has led to some great operational results as we increased the ratio of associates put to work versus all applicants. Early results indicate a 20% increase in worker throughput. This is exciting because as we move back to a supply-constrained environment, an increase in worker throughput will translate directly to revenue. We believe we can further improve applicant throughput as we fine-tune our processes. Right now, we're also very focused on driving heavy client-user growth. A heavy user is a client who has 50 or more touches on Jobstack per month, whether it's entering an order, creating a worker, or approving time. Jobstack heavy users have consistently posted better year-over-year growth rates compared to the rest of people ready. The growth differential is north of 20 percentage points, and it's held true even in this market downturn. This makes sense since we have many clients who use multiple vendors, and we can grow our business simply by growing our wallet share, even if our client's total volume is flat to down. Our focus on heavy user growth is starting to pay off. We doubled our heavy user mix since 2019, up from 11% of our business in fiscal 2019 to 22% for 2020 year-to-date. Our positive strategic progress is obviously overshadowed by the macro environment at the moment, but we continue to invest in our digital strategy and believe this approach will help PeopleReady emerge stronger than ever. As our digital strategy continues to mature, we're taking a look at areas within PeopleReady where we can reduce our service delivery costs. In 2020, we began testing a few different strategies. It's too early to quantify potential savings, but we're developing a plan where cost savings will come from a mixture of both technology utilization and changing our go-to-market approach. As we move down this path, I want to emphasize that the value and importance of our branch network should not be underestimated. We need to maintain a local presence in the communities where we do business. At the same time, we do see an opportunity to centralize more services and reorient job roles to improve our client-focused delivery. We'll continue to update you on this front as our plans evolve. Turning to people management, our strategy is to focus on execution and grow our client base. Initiatives we've already implemented include sharpening our vertical market focus, to target essential manufacturers and leverage our strength in e-commerce. These are verticals that have held up well relative to the decline in non-essential goods at traditional brick and mortar retailers. We've also completed the integration of our staff management CMOS brand sales team, allowing the integrated team to offer a full portfolio of hourly and cost per unit solutions to clients. These strategic initiatives are already paying off. Even in the middle of this downturn, Year-to-date new business wins of people management are up 13% versus the prior year as we've secured $70 million in annualized new business wins versus $62 million the prior year. Approximately half of new wins are in our Q3 run rate. As the demand environment recovers, we'll be increasing sales resources and investing in client care programs to maintain our momentum. Turning to PeopleScout, Our strategy is to capture opportunities in an industry poised for growth. Before COVID struck, we noticed a trend towards insourcing with a handful of clients bringing more recruitment functions in-house. Many of those in-house teams have been reduced or eliminated during the pandemic, and we expect a trend reversal back towards outsourcing as the economy recovers. Our strategy leverages our strong brand reputation as we are consistently ranked as a market leader by independent industry analysts And PeopleScout is traditionally the highest margin business within our portfolio. Finally, I'd like to take a moment to touch on our balance sheet and capital allocation priorities. We do have a solid balance sheet. Our credit facility provides ample liquidity, and we entered Q3 with more cash than debt. Before the pandemic hit, we were generating substantial free cash flow and were focused on returning capital to shareholders. Over the last five years, we've returned $169 million of capital to shareholders via share repurchases. As we return to a more normalized environment, investing in our organic business opportunities will remain our top priority, but we'll also expect to renew our focus on returning excess capital to shareholders. I'll now pass the call over to Derek, who will share greater detail around our financial results.