TrueBlue, Inc.

Thank you for standing by and welcome to the True Blue Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during a 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. 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, and a full transcript and audio replay will be also 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. Before I dive into quarterly results, I wanted to take a moment to reflect back on 2020. In March of 2020, jurisdictions across the country began implementing restrictions to protect public health. As the impact of COVID set in, many of our clients temporarily halted operations or reduced volumes, and our revenue dropped precipitously. By April, our year-over-year revenue decline hit a low of 42%. Management was prepared for this moment, and we reacted quickly. We deployed pre-existing recession plans and modified operational protocols to focus on the health and safety of our employees, workers, and clients. In April, we unveiled a plan to reduce 2020 SG&A by approximately $100 million compared to 2019, which we have exceeded. These cost reductions helped us right-size the business to match lower client demand and preserve capital. The actions were difficult, but they were taken with care and with the long-term in mind. For the employees that lost their jobs, we provided three months of fully paid extended healthcare benefits so they wouldn't have to scramble for new coverage in the midst of the pandemic. To ensure we're well positioned that business conditions improved, we are investing heavily in client and candidate facing technologies and kept our branch footprint fully intact. Finally, to reward our employees for sticking with us this year, we are paying a one-time bonus. The impact of our efforts is evident in our results. Our revenue trends have been improving each quarter since Q2 2020, and we posted positive net income in the third and fourth quarters. For the full year, revenue was down 22%. To mitigate this decrease, we reduced selling general and administrative expense by 21%. While we encountered a net loss for the year, largely due to a goodwill and intangible asset impairment charge in the first quarter, and workforce reduction charges in the second quarter, we were profitable on an adjusted net income basis for the year. Of equal importance, employee morale and engagement is high. Our most recent employee engagement scores from September were higher than they were prior to the pandemic. Now let's discuss our fourth quarter results. We took the right actions to restore profitability and position the company for long-term growth as the economy continues to recover. In addition to improving revenue trends, with the fourth quarter down 12% versus 25% in the third quarter, we sustained our cost discipline to drive year-over-year growth of 25% in income from operations. Now, let's turn to our results by segment, starting with People Ready. People Ready is our largest segment, representing 60% of trailing 12-month revenue and 73% of segment profits. PeopleReady 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 18% during the quarter versus down 29% in Q3. And we saw intra-quarter improvement with revenue down 15% in December versus down 20% in October. People management is our second largest segment, representing 32% of trailing 12-month revenue and 20% of segment profit. 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 were more resilient in the downturn when compared to the supplemental nature of a typical people-ready client engagement. People management returned to growth in the fourth quarter with revenue up 5%, an intra-quarter improvement with December up 9% versus up 1% in October. Turning to our third segment, People Scout, represents 9% of trailing 12-month revenue and 8% of segment profits. PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing and managed service provider offerings. Revenue was down 24% during the quarter versus down 48% in Q3. 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. A long-term strategy at PeopleReady is to further digitalize our business model to gain market share and improve the efficiency of our cost structure. 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 Q4 2020, we filled 811,000 shifts via Jobstack, representing a digital fill rate of 57%. Our client user count ended the quarter at 26,300, up 23% versus Q4 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. We continue to experience an increase in worker throughput of approximately 20%. We expect this percentage to further improve as we fine-tune the process. This is exciting, and as we move back toward a more supply-constrained environment, increased throughput will translate directly to revenue. Right now, we are 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, rating a worker, or approving time. Jobstack heavy users have consistently posted better year-over-year growth rates compared to the rest of people already. The gross differential between heavy users and non-users reached its peak in December, with an over 30 percentage point year over year growth differential on a same customer basis. This growth differential is largely driven by wallet share takeaways from competitors. Heavy user clients are telling us a major reason they are moving share to PeopleReady is due to Jobstack's unique capabilities. Our focus on heavy user growth is beginning to become more material in our overall results. For all heavy users, we doubled the mix since 2019. up from 11% of PeopleReady's business in fiscal 2019 to 24% for 2020. Of course, our positive strategic progress is 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 prior to the pandemic. 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 to further reduce the cost of delivering our services. We plan to expand our testing in 2021 to include more technology utilization and an altered 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 our 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 plans progress. 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 made a concentrated effort to enhance the productivity of our sales teams. First, we completed the integration of our staff management and CMOS brand sales teams, allowing the integrated team to offer a full portfolio of hourly and cost per unit solutions to clients. Second, We are expanding our presence in smaller markets we believe have been underserved. These strategic initiatives are already paying off. Even in the middle of this downturn, year-to-date new business wins in people management are up 20% versus the prior year, as we've secured 79 million of annualized new business wins versus 66 million in the prior year. As the demand environment recovers, we'll be increasing sales resources and investing in client care programs to maintain our momentum. Turning to PeopleScout, the strategy leverages our strong brand reputation to capture opportunities in an industry poised for growth. Before COVID struck, we, along with our competitors, experienced a trend towards more insourcing, with some clients bringing more recruitment functions in-house. Many of the in-house teams have been reduced or eliminated during the pandemic, and we expect a trend reversal back towards outsourcing as the economy recovers. Focusing our sales teams on this trend will allow us to increase wallet share in our existing clients and diversify the industry mix within our portfolio. I'd like to take a moment to touch on our capital allocation priorities. During the first half of 2020, we repurchased $52 million of our common stock or 9% of our common stock outstanding at favorable prices. While 2020 was not an easy year, and took the right actions to preserve the longevity of the business while retaining our operational strengths. Investments in our digital strategy and our lean cost structure have us well positioned for 2021. I'm extremely proud of the leadership and resolve demonstrated by the entire True Blue team. By coming together and staying true to our mission of connecting people and work, we have continued to provide a vital service to our communities, even in the midst of a pandemic. Thank you to all of our employees, associates, suppliers, and clients. I'll now pass the call over to Derek, who will share greater detail around our financial results.