TrueBlue, Inc.

Greetings and welcome to the True Blue fourth 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like 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 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 True Blue's investor website at the conclusion of today's call. And a full transcript of the 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. Please go ahead.

Thank you, Operator, and welcome everyone to today's call. I am joined by our Chief Financial Officer, Carl Schweiss. 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 curb 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 onsite 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 in two additional facilities. Another example comes from our commercial driving business, where a longstanding 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 team 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 job stack app, allowing us to control our roadmap and continuously expand the value we bring to our customers and associates. We also delivered strong performance in 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 onsite 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, and 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 and creating efficiencies. Our proprietary technologies, including Jobstack and Affinix, allow us to accelerate innovation and implement enhancements quickly to address evolving user needs. For example, we recently introduced AI-assisted on-demand digital interviewing and self-scheduling using our Affinix technology, which has shown to reduce processing times up to seven days, while Jobstack's latest ReadyMatch 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 optimizing success rates. 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 under penetrated in 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 workups 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 True Blue team as 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 People Scout team also recently announced a landmark talent advisory win, having been selected as a delivery partner to provide employer brands and candidate attraction services for the UK's Armed Forces, further expanding our presence in the government sector. With the traditional in-markets we serve poised for growth and our continued expansion in under-penetrated markets, we are well positioned for a strong rebound and accelerated growth. Another key priority is to optimize our business model to drive enhanced sales focus, ultimately accelerating our growth and improved 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 and cross-selling. For example, our People Ready and People Management teams recently won a joint pursuit serving a global environmental services company to staff temporary warehouse positions, as well as long-term supervisor, skilled, and 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, in People Ready, we are aligning our on-demand organization into territories that include one or more branches 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 job stack app, is expected to improve results across our on-demand field network. We will make this investment in a cost-neutral way thanks to our disciplined cost actions 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-term staffing outlook remains positive and we are managing through the cycle with the discipline and agility needed to ensure we are strategically positioned for strong growth and profitability as conditions improve. We are excited about the opportunities ahead and are confident that 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 million, a decline of 22% with six percentage points driven by the extra 14th week in the prior year, resulting in a 16% decline on a comparable 13-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 spent. 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 People Scout team continues 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 people management segment, as well as a decline in our highest margin business, People Scout, which drove a decline of 80 basis points. Pricing pressures consistent with the current market environment contributed another 20 basis points of decline, and software depreciation, now recorded in cost of services, drove another 20 basis points of decline. Keep in mind, software depreciation is non-cash and excluded from our EBITDA and adjusted EBITDA calculations. We reduced SG&A by 18% as we remained 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 million of additional non-cash expense in the fourth quarter. This accelerated expense as well as other costs associated with upgrading our legacy People Ready technology are excluded from our adjusted net income and adjusted EBITDA calculations. On an adjusted basis, we reduced SG&A by 24%, outpacing our revenue decline as 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 million this quarter, which included $2 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 $1 million, while adjusted EBITDA was positive $9 million. Now let's turn to the specifics of our segments. PeopleReady revenue decreased 21% on a comparable 13-week basis, which includes two points of decline from the sale of our on-demand business in Canada. The extra 14th week in the prior year contributed six points of additional year-over-year decline, resulting in reported revenue decline of 27%. 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 with an improvement to underlying trends as we exited the quarter. People-ready segment profit margin was up 80 basis points, largely driven by favorable workers' compensation reserve adjustments, which were partially offset by lower operating leverage as revenue declined. PeopleScout revenue decreased 30% on a comparable 13-week basis, which includes eight points of decline from the client loss we discussed last quarter. The extra 14th week in the prior year contributed one point of additional year-over-year decline, resulting in reported revenue decline of 31%. We saw reduced client volumes as businesses continued 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's segment profit margin was down 220 basis points due to the lower operating leverage as revenue declined. People management revenue decreased 2% on a comparable 13-week basis, with the extra 14th week in the prior year contributing seven points of additional year-over-year decline, resulting in a reported decline of 9%. The decline in demand was driven by lower onsite 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. People management segment profit margin was up 220 basis points, primarily due to disciplined cost management actions to drive improved efficiencies. Now let's turn to the balance sheet. We finished the quarter with $23 million in cash, $8 million of debt, and $119 million of borrowing availability. We have diligently balanced strategic investments and returning excess capital to shareholders with maintaining a strong liquidity position to pursue growth opportunities. This focused capital strategy enabled our recent acquisition of healthcare staffing professionals, where we leveraged a strong balance sheet to take on a modest amount of debt and attractive terms to capitalize on the strategic opportunity. Healthcare staffing professionals, or HSP, was purchased on January 31st for $42 million, with the possibility of an additional $14 million of consideration if favorable results are achieved over the next two years. We expect the HSP business to produce segment profit of 5 to 7 million over the next 12 months, which corresponds with a forward-looking multiple of six to eight times. We're excited to bring HSP 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 will turn. We expect SG&A of 93 to 97 million, which represents an improvement of roughly 12 million 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 website today. Before we open up the call for questions, I want to turn it back over to Taryn for some closing remarks.