TrueBlue, Inc.

Greetings and welcome to the True Blue first quarter 2025 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 obligations 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 Schweiss. As expected, the subdued market demand we discussed on our last call continued in the first quarter. Revenue for the quarter was $370 million and near the high end of our outlook range due to encouraging trends in our on-demand and on-site staffing businesses. I am incredibly proud of the resilience and dedication shown by the True Blue team as we help our customers navigate an increasingly complex and unpredictable business landscape, all while persistently controlling costs. Evolving governmental policies have hindered business confidence and thereby continue to suppress the staffing industry. Despite these challenges, we remain diligent in driving value for our customers with innovative and flexible workforce solutions. For example, our on-site business recently secured a new engagement with a global logistics company, helping them to drive enhanced efficiencies and replacing over 35 vendors across the client's network. Another example comes from our people-ready on-demand business, where a large national retail customer needed increased support as they worked through large-scale store liquidations, and our team was there, tapping into our extensive branch network to quickly address the heightened demand. Our depth of expertise enables us to understand the unique challenges our clients face, and we continue to support them every step of the way. As we leverage our inherent strengths and comprehensive service offerings to meet the needs of the market today, we are also paving the path forward with our strategic priorities to capture market share and enhance our long-term profitability. We are expanding our presence in high-growth and under-penetrated end markets, as well as high-value roles, to capitalize on secular growth opportunities. We have additional opportunity to drive revenue expansion in the healthcare space, thanks in large part to the recent addition of healthcare staffing professionals to our portfolio. While still new to the True Blue team, we are excited to see HSP expanding into new regions and operational synergies forming as we collectively target the secular growth market with significant untapped potential. Meanwhile, Our momentum has continued to build within our People Scout business with several new business wins focused on professional roles in a variety of industries, including healthcare, engineering, and technology. We also continue to expand our strong position in skilled trades with our centerline commercial drivers business delivering its third consecutive quarter of double-digit revenue growth and a solid pipeline paired with our successful track record in the energy and construction verticals. Advancing the significant progress we have already achieved over the past year and expanding our presence in under penetrated markets sets us up for a strong rebound and accelerated growth. We also continue to advance our digital transformation with a focus on enhancing the user experience and creating efficiencies. Our proprietary technologies allow us to control our roadmap and accelerate innovation. For example, PeopleScout recently launched the Outthink Index, a proprietary benchmarking tool that empowers organizations with actionable and competitive insights to strengthen their brand performance. We also continue to strategically invest in our job stack, staff track, and Affinix platforms with robust roadmaps focused on elevating the user experience, improving operational efficiencies, and advancing AI utilization. AI is embedded across our proprietary platforms helping us to enhance every stage of the staffing lifecycle and deliver superior workforce solutions. For example, we are expanding the use of generative and conversational AI in the recruitment process to make applying for roles simple and seamless for the candidates. We look forward to continuing these advancements as our proprietary technology combined with our expansive market presence and expertise position us to drive growth and expand our reach with a more customized, differentiated experience. Building on our successful efforts to streamline and create efficiencies, we are also advancing our strategic priority to optimize our business model in ways that drive enhanced sales focus and accelerate our growth and improved profitability. As I mentioned last quarter, we are aligning our people-ready on-demand organization into territories and adding sales representatives across the country to implement targeted sales strategies in each territory. We are on track to increase our field sales representatives by 50% with the first wave of new hires joining the team in Q1 and supported by a newly formed sales leadership team with deep expertise. We expect the addition of dedicated sales representatives combined with focused responsibilities between operations and sales to improve results across our on-demand field network. And we are already seeing signs of success with stronger performance in the sales enabled territories rolled out thus far. Another way we are looking to optimize our business model is through strategic partnerships that will help us expand and accelerate growth. For example, we recently announced a strategic partnership with a leading group purchasing organization, Omnia Partners, to help businesses across the private sector source more tailored and efficient workforce solutions. Implementation has also begun for the UK Armed Forces engagement that I mentioned last quarter, where we will serve as a delivery partner providing employer brand and candidate attraction services. Across the organization, we are committed to finding new and differentiating ways to capture demand and better leverage our strengths and assets to deliver long-term profitable growth. While economic uncertainty persists, creating a challenging market environment, the long-term staffing outlook remains positive, and we are enthusiastic about the opportunities ahead. Evolving workforce needs and structural staffing shortages create compelling opportunities for our business, and we 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 $370 million, a decline of 8%, and at the high end of our outlook range. Included in these results is three percentage points of growth driven by our recent acquisition of HSP. As expected, overall market demand remains soft as uncertainty and client caution continue to weigh on the staffing industry. While these factors led to subdued volumes across most verticals, our teams are doing a fantastic job capitalizing on growing markets and creating opportunities for additional growth. For example, our onsite team outperformed the prior year in new business wins this quarter and our commercial driver business, delivered double-digit growth for the third consecutive quarter. Gross margin was 23.3% for the quarter, down 140 basis points. Lower workers' compensation costs driven by favorable development of prior year reserves contributed 130 basis points of expansion. This was offset by changes in revenue mix, with more favorable trends in our lower margin businesses contributing 210 basis points of decline. Pricing pressures consistent with current market conditions drove another 30 basis points of decline, and certain software depreciation now being reported in cost of services contributed 30 basis points. Keep in mind, software depreciation is non-cash and excluded from our EBITDA and adjusted EBITDA calculations. We successfully reduced SG&A by 12%, outpacing our revenue decline as we remain disciplined and committed to enhancing our profitability. We have made significant progress creating greater flexibility to scale, so while our profitability traditionally expands quickly as revenue grows, our lean cost structure and improved efficiencies mean that we're even better positioned to deliver enhanced profitability as industry demand rebounds. We reported a net loss of $14 million this quarter, which included a small amount 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. Conversely, we recognized a tax benefit of $12 million on similar pre-tax results in Q1 last year. As a reminder, the valuation allowance has no impact on our operations, liquidity, or debt covenants. Adjusted net loss was $12 million, while adjusted EBITDA was minus $4 million. Now let's turn to our segments. First, I'd like to call out our new People Solutions segment, which includes our previously reported People Scout segment, as well as our newly acquired HSP business. This reporting structure combines our more professional and specialized service offerings into a single view, aligning with our commitment to expand in high-growth end markets and high-value roles as we target significant growth opportunities in attractive sectors such as healthcare. Revenue for our People Solutions segment declined 2%, with HSP performing in line with expectations and contributing 24 percentage points of inorganic growth, partially offsetting the segment's organic decline of 26%. Also included in these results is eight percentage points of decline from the client loss we discussed in previous quarters. Overall, clients continue to face cost pressures and uncertainty around their workforce needs, leading to reduced hiring volumes. Despite the challenging market dynamics at play, our teams continue to outperform in new business wins, especially in high-value professional roles and attractive end markets, positioning us well to drive further revenue expansions as customers' hiring volumes return. People Solutions segment profit margin was down 620 basis points due to the lower operating leverage as revenue declined. PeopleReady revenue declined 15%, which includes one point of decline from our February 2024 sale of our on-demand business in Canada. Reduced client volumes continued across most verticals and geographies, with the largest being in hospitality and manufacturing. While market conditions continue to evolve, we are encouraged to see improved trends in our on-demand business as we exited the quarter and growing momentum in skilled trades with strong new business wins and a healthy pipeline of additional growth opportunities. People-ready segment profit margin was up 70 basis points, largely driven by favorable workers' compensation reserve adjustments, which were partially offset by lower operating leverage as revenue declined. People management returned to growth this quarter, with revenue up 1%. driven by strong results from our commercial driver's business. This marks the third consecutive quarter of double-digit growth in our commercial driver's business, and while on-site client volumes declined for the quarter, trends showed signs of improvement as we exited the quarter, bolstered by continued strength in our new business wins. People management's segment profit margin was flat as our disciplined cost management actions continued to drive improved efficiencies. Now, let's turn to the balance sheet. We finished the quarter with $23 million in cash, $58 million of debt, and $71 million of borrowing availability, resulting in total liquidity of $94 million. We continue to maintain a very focused capital strategy, balancing strategic investments with maintaining a strong liquidity position to pursue additional growth opportunities. This provides us with great flexibility and ensures we are ready to capitalize as market demand rebounds. Turning to our outlook for the second quarter, we expect revenue of minus one to plus 5% year over year. This includes five percentage points of inorganic growth from the acquisition of HSP. Our outlook reflects a continuation of current market trends because while there are some signs of improvement, the business landscape remains unpredictable. I also want to call out the roughly 9 million in COVID-19 government subsidy benefit we expect in the second quarter, with 3 million flowing through cost of services and 5 million in SG&A. Also, keep in mind, given the seasonality of our business, we typically see our highest volumes in the second half of the year. So while we expect improved operating leverage in the second quarter, our lean cost structure will drive additional margin improvement as we move through the year. Additional information on our outlook can be found in our earnings presentation shared on the website today. Before we open the call up for questions, I want to turn it back over to Taryn for some closing remarks.