TrueBlue, Inc.

Greetings and welcome to the True Blue third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, 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 management assumes 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 SEC filings, could cause actual results to differ materially from those in the forward-looking statements. Management uses non-GAAP measures when presenting financial results. you are encouraged 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, a copy of the company's prepared remarks will be provided on TrueBlue's investor website at the conclusion of today's call. And a full transcript and audio replay will be available soon after the call. It is now my pleasure to turn the call over to Taryn Owen, President and Chief Executive Officer.

Thank you, Operator, and welcome everyone to today's call. I am joined by our Chief Financial Officer, Carl Schweitz. We appreciate you being here with us. As expected, market conditions remain challenging. Revenue for the quarter was $382 million, down 19% compared to the prior year, as uncertainty and client caution continued to weigh on the staffing industry, leading to reduced business spend and curbed hiring trends. Customers are looking for market confidence to grow before making significant adjustments to their workforce strategy. This hesitancy is apparent in both current client volumes as well as new business trends with engagement starting at subdued levels following an elongated decision process. Given the labor dynamics at play, we are focused on the areas we can control to meet the needs of the current market and ensure we are well positioned to support demand as workforce needs expand. Our teams are doing tremendous work meeting customers where they are today with short duration and flexible solutions while also establishing new relationships that will drive future growth. For example, as the economy slowed, one of our long-standing national on-site customers, a Fortune 100 retailer, reduced their contingent labor as their own volumes declined. We maintained a strong connection with the customer while serving fewer locations, and as the customer reopened and launched new facilities, we were there to support their needs, expanding to the new sites and deepening our relationships. Another example comes from our People Scout team, who secured an RPO engagement early in the year with a multinational food product company. Driven by our exceptional service and execution, that client relationship has recently expanded to encompass MSP and professional search services. These examples are a testament to our team's ability to adapt and create opportunities for additional growth. As our teams stay highly engaged with clients to address both their immediate and evolving needs, We are also scaling our operating structure to align with current market demand while delivering efficiencies to ensure we are ready as customer volumes return. We understand the current labor dynamics and we are managing through the cycle with the discipline and agility needed to ensure we are even better positioned as conditions improve. We are also committed to advancing our strategic priorities to capture market share and enhance our long-term profitability. We made significant progress during the quarter, accelerating our digital transformation, expanding our presence and attractive in market, and simplifying our organizational structure to better leverage our inherent strengths as we look to capture the growth opportunities ahead. Positioning our contingent staffing business to better compete in a digital forward future is a key strategic priority. Our expansive local presence, powered by our national footprint and differentiating technology, sets us apart as a market leader. We have successfully rolled out our new proprietary job stack app across our branch network and national account base, well ahead of our year-end goal. This transition marks a significant milestone in the digital transformation of our business, as the proprietary technology allows us to control our roadmap and quickly address evolving user needs, increasing the ease in which customers and associates engage with us. We are excited by the early success of our launch as we leverage real-time insights to implement enhancements. For example, customers shared their desire for an easy way to get high-performing associates back on their work sites, and we responded quickly with an exclusive invite feature that connects the associate to the customer using a fast and seamless experience. These insights allow us to implement competitive enhancements faster, rapidly improving our products and services, and continually expanding the value we bring to our customers and associates. We look forward to developing additional features as we strengthen our market position through a differentiated experience that combines our technology with our expansive market presence and expertise. Another key strategic priority is our expansion in high growth, less cyclical, and under-penetrated end markets to capitalize on secular growth opportunities. We have continued to expand our healthcare presence across the organization, and we have developed a strong position in attractive skilled trade markets, including commercial driving services and renewable energy work. Leveraging our deep expertise in expanded service offerings, we delivered our third consecutive quarter of growth in commercial driving services. While our renewable energy work did not grow in the quarter, we are up double digits for the year. Fluctuation in client volumes is expected, given the nature of these projects, and the pipeline remains healthy, positioning us well to capture further growth opportunities in this space. We have also continued to diversify our RPO business into higher skilled placements, including professional search, and leverage our flexible solutions to capture growth opportunities in attractive end markets, such as technology and professional services. We are energized by our early success, winning new deals and expanding existing relationships with higher skilled roles and serving high growth and high value in market. As customer volumes return, the scale of these engagements will drive further opportunities for revenue expansion. A third strategic priority is simplifying our organizational structure to drive enhanced focus, growth and profitability. Streamlining creates opportunities to reduce inefficiencies and brings our teams closer to our clients and associates to deliver operational excellence. We have made notable strides in this area and continue to operate with discipline to create greater agility and flexibility to scale as we look to realize future growth. We reduced our operating costs by 17% for the quarter, and beyond that, we are already seeing benefits from our efforts in the form of increased synergies and cross-selling as we eliminate silos and enhance our focus on our core specialties. Although current labor market dynamics are challenging, the long-term staffing outlook remains positive. We are managing through the cycle with the discipline and agility needed to ensure we are strategically positioned for even stronger growth and profitability when customer demand volumes return. Evolving workforce needs and structural staffing shortages will create compelling opportunities for our business and our competitive strengths, tremendous assets, and clear strategic priorities position us well for growth. We are excited about the opportunities ahead, and 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. 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 $382 million. a decline of 19%. Overall market demand for temporary labor and permanent hiring continues to be suppressed as clients focus on reducing their operating costs and remain hesitant to make full-time hires due to uncertainty in their workforce needs. While these factors led to overall subdued client volumes, our commercial driving services showed strength, delivering double-digit growth for the quarter. This marks the third consecutive quarter of growth for our commercial driving services And our team continues to capitalize on this momentum, pursuing additional growth opportunities in this space. Gross margin was 26.2% for the quarter and flat compared to the prior year. There were a couple of offsetting components for this quarter. Changes in revenue mix, both from more favorable trends in our lower margin people management segment, as well as the decline in our highest margin business people scout drove a decline of 80 basis points. Pricing pressures consistent with the current market environment contributed another 60 basis points of decline. These factors were offset by 140 basis points of expansion from lower workers' compensation costs driven by favorable development of prior year reserves. We reduced SG&A by 17% as we remain committed to enhancing our profitability. We're focused on the areas we can control, which is demonstrated by our disciplined actions to better align our cost structure with client demand while also creating greater flexibility to scale as industry demand rebounds. We've made significant progress simplifying our organizational structure and creating efficiencies that are already driving improved results. Looking forward, our profitability traditionally expands quickly as revenue grows. But with our lean cost structure and improved efficiencies, we are even better positioned to deliver enhanced profitability as conditions improve. We reported a net loss of $8 million this quarter. which included 1 million of income tax expense primarily associated with our foreign operations and essentially zero income tax benefit on U.S. operations due to the valuation allowance in 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 3 million, while adjusted EBITDA was 5 million. Now let's turn to the specifics of our segments. People-ready revenue decreased 24%, which includes two points of decline from the sale of our on-demand business in Canada, and segment profit margin was down 200 basis points. Lower client volumes continued to drive reduced demand across most verticals and geographies. We entered the quarter behind our typical sequential build, which continued in July, but as we progressed through the quarter, we did return to historical sequential trends in August and September. For renewable energy work, we didn't grow in the quarter due to the lower volume on existing solar projects, mainly driven by high temperatures in the Southwest United States, as well as a delayed new project starts. Given the nature of these renewable energy projects, these types of delays and fluctuations in volumes are expected. We continue to produce double digit growth for the year as we capitalize on the secular growth opportunities with a strong market position. From a margin perspective, the contraction was largely driven by lower operating leverage as revenue declined. PeopleScout revenue decreased 31%, and segment profit margin was down 490 basis points. The decline in demand was driven by lower client volumes as businesses continued to navigate challenging market dynamics, responding to cost pressures and uncertainty around their workforce needs. Results for the quarter were also impacted by the loss of a large hospitality client, which accounted for eight points of the revenue decline. The loss was due to the client's decision to insource the hiring of high-volume roles as part of a broader strategy change. At the same time, our team is doing a great job adding clients to the portfolio and has already outperformed in the prior year in new business wins. While many of these new wins are starting at subdued levels, we expect these relationships to drive further revenue expansion as customers' hiring volumes return. The margin contraction was driven by lower operating leverage as revenue declined. People management revenue decreased 5% while segment profit margin was up 90 basis points. The decline in demand was driven by lower onsite client volumes, consistent with the macro conditions evident in the verticals we serve, such as retail. This was partially offset by double-digit growth in our commercial driving services, which delivered its third consecutive quarter of growth in Q3. People management segment profit margin expanded due to disciplined cost management actions to better align our cost structure with client demand and improved efficiencies. Now let's turn to the balance sheet. We finished the quarter with no debt, 15 million in cash, and 133 million of borrowing availability. We repurchased 4 million of common stock during the quarter, leaving 34 million remaining under our authorization. While operating cash flows are down, largely driven by changes in revenue mix and the associated working capital, we have a solid balance sheet and a strong liquidity position. This provides us with great flexibility as we look to drive future growth opportunities. Turning to the outlook for the fourth quarter, we expect a revenue decline of 24 to 18%. This includes six percentage points of headwind from the extra 14th week in our fiscal fourth quarter last year, as well as one percentage point due to the sale of our on-demand business in Canada. Our outlook reflects a continuation of current market trends because while there are some bright spots and signs of improvement, we have yet to see an indication as to when overall demand trends will turn. We expect SG&A of 98 to 102 million, which represents a reduction of roughly 30 million compared to the prior year period, as we manage through this market cycle with a commitment to enhance our profitability and ensure we are well positioned as the demand environment rebounds. Additional information on our outlook can be found in the earnings presentation shared on our website today. Before we open the call up for questions, I want to turn it back over to Taryn for some closing remarks.