TrueBlue (NYSE:TBI) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below.

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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=lHMQeuuq

Summary

TrueBlue reported a net loss of $20 million for the quarter, including a $4 million non-cash goodwill impairment charge, with an adjusted net loss of $12 million and adjusted EBITDA of negative $3 million.

PeopleReady segment grew by 19% driven by strong performance in the energy vertical, with profit margins up 10 basis points due to cost efficiencies.

People Management revenue declined by 6%, but secured $13 million in new business wins, with profit margins up 50 basis points.

People Solutions revenue grew by 2%, with segment profit margins up 150 basis points, driven by operational efficiencies and expansion in higher-skilled markets.

The company reported $24 million in cash and $74 million in debt, transitioning its credit agreement to an asset-backed structure for greater flexibility.

TrueBlue expects 2% to 8% revenue growth in the second quarter of 2016, with anticipated growth across skilled business segments and improved profitability.

Management highlighted the strategic use of AI to improve efficiency and growth, particularly in data centers and skilled trades related to energy projects.

Company's focus remains on managing costs, achieving operational efficiencies, and maintaining a strong liquidity position to capitalize on growth opportunities.

Full Transcript

OPERATOR

For the quarter. This improved leverage demonstrates our commitment to effectively manage costs and deliver enhanced profitability. We've made significant progress creating greater flexibility to scale and driving efficiencies that position us well to deliver strong incremental margins as industry demand improves and we continue to advance our growth initiatives. We reported a net loss of 20 million this quarter which included a non cash goodwill impairment charge of $4 million driven largely by our lower share price and market capitalization during the quarter. Our results also included a small amount of income tax expense primarily associated with our foreign operations and essentially zero income tax benefit on US Operations due to the valuation allowance in effect on our US Deferred tax assets. As a reminder, the impairment charge and valuation allowance have no impact on our operations or liquidity. Adjusted net loss was 12 million while adjusted EBITDA was negative 3 million for the quarter. Now let's turn to our segments. PeopleReady grew 19% driven by continued outperformance in the energy vertical. Revenue in the energy sector more than doubled for the third consecutive quarter as our team continues to leverage our strong market position and deep client relationships to capture share in this growing market. Our on demand business is also showing improved trends, especially in the territories where we have invested in sales resources and we were encouraged to see the east region of the U.S. return to growth this quarter despite the workers compensation headwind I mentioned earlier. PeopleReady segment profit margin was up 10 basis points driven by targeted cost actions to deliver efficiencies and improved profitability. People management revenue declined 6% due to lower on site volumes, primarily in the retail vertical and consistent with the macro conditions in that space. While client volumes declined for the quarter, we are building momentum having secured 13 million in annualized new business wins during the first quarter alone and positioning the business well to drive revenue expansion. Our commercial driver business also continues to outperform, delivering its ninth consecutive quarter of growth as our strong client relationships and deep expertise drive continued success capturing rising demand. People Management segment Profit margin was up 50 basis points due to disciplined cost management actions to drive improved efficiencies and greater scalability. People Solutions revenue grew 2% with HSP performing in line with expectations and driving the year over year growth on an organic basis. People Solutions declined 7% as overall hiring volumes remain subdued. While clients continue to navigate evolving market conditions, we are encouraged to see signs of stabilization with growing momentum in new business wins and expansions. We are adding new clients to our portfolio and expanding existing relationships especially with higher skilled roles and serving growing end markets with long term secular tailwinds as client hiring volumes return. The scale of these engagements positioned us well to accelerate growth. People Solutions segment profit margin was up 150 basis points, primarily driven by cost actions to deliver efficiencies and greater operating leverage. Now let's turn to the balance sheet. We finished the quarter with $24 million in cash, $74 million of debt and 36 million unused on our borrowing base resulting in total liquidity of 60 million effective January 30th. We transitioned our revolving credit agreement to an asset backed structure creating greater flexibility given our strong working capital position. We also reduced the size of the facility to better align with our capital priorities resulting in cost savings as we lowered the fees associated with the unused portion of the facility. We remain committed to managing a strong liquidity position and financial foundation to ensure we are well positioned to capitalize on the growth opportunities ahead. Looking ahead to the second quarter of 2016, we expect revenue growth of 2% to 8% year over year as we continue to build on our success in recent quarters. With strong momentum in attractive markets, we expect growth across all of our skilled businesses and a return to double digit segment profit margins for our People Solutions segment. We expect sequential gross margin expansion of 130 to 170 basis points paired with continued cost discipline leading to improved profitability. Also keep in mind that we typically see our highest volumes in the second half of the year due to the seasonality of our business. So while we expect improved operating leverage in the second quarter, our lean cost structure will lead to further margin improvement as we move through 2026. Additional information on our outlook can be found in our 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.

Taryn

Thank you Carl. And as you have heard from us today, our strategic focus is producing meaningful results and there is still more work to be done. We are executing our growth strategy with discipline and focus, strengthening our market position with an enhanced sales model and market expansion while unlocking efficiencies through technology and operational excellence to deliver sustainable, profitable growth. We have the right people structure and strategy to propel TrueBlue forward and as our focused actions drive improved results, we are well positioned to deliver on our commitment to accelerate growth, enhance shareholder value and advance our mission to connect people and work. This concludes our prepared remarks. Operator Please open the call now for questions.

OPERATOR

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We'll pause for a moment to pull for questions and our first question today will come from Kartik Mehta with North Coast Research.

Kartik Mehta (Equity Analyst)

Hey, good afternoon. Taryn and Carl,. Taryn, maybe we could just talk a little bit about the core on demand business. Maybe your perspective on how the business is doing. I apologize for that. And if you look at it, are we at a positive inflection point for that business?

Carl

Hi Kartik, thank you for the question. We are encouraged by the positive results we're seeing in our People Ready on demand business. We continue to see strong performance across our territories and sales organization with results reflecting improved growth and profitability. A majority of our territories in PeopleReady On Demand have returned to growth for the year driven by local account business growth Weekly trends have been improving and while there's more work ahead, we are confident in our ability to continue building on this momentum. And just to build on that with a few data points here at Kartik, you know, as we mentioned in prepared remarks, our PeopleReady east region return to growth in Q1. And I'd also say that the momentum is shifting positively across the U.S. while it's not uniform, we're seeing those more territories move back into growth each month as we move on. We've also been able to make these sales investments while managing our costs. SG and A for PeopleReady declined 10% for the first quarter, reflecting a more efficient cost structure. So I'd say the progress is really a result of our ongoing efforts to optimize our fixed cost base, enhance our digital capabilities, which will give us room to invest in growth while protecting our margins. And I'll just leave you with, you know, momentum does continue to build and people are already on demand. And our outlook for the second quarter reflects trends that that are aligned to our historical sequential performance when we start to build this business from spring into the summer.

Kartik Mehta (Equity Analyst)

Yeah, thanks, Carl. Taren, the one question almost all my companies are getting, as you can imagine, it's AI. And I'm wondering if you look at True Blue one, how maybe True Blue might be using AI to become a little bit more efficient. Maybe how you're using it to better serve your customers. And just from a competitive standpoint, if you're seeing AI have an impact on your ability to serve your customers, sure.

Taryn

Thanks for the Question. We're embracing AI and it is differentiating TrueBlue services in ways that improve scalability, productivity and satisfaction, ultimately increasing value for our customers and our associates. AI is embedded across all of our proprietary technologies. So that's Job Stack, Affinix and Staff Track and it's really helping us to enhance every stage of the staffing life cycle. As importantly, AI is driving significant growth in demand for data centers. What often gets overlooked is that AI depends on physical infrastructure. Data centers require enormous amounts of reliable power. And that power, and the skilled workforce behind it is where we have an opportunity to play a critical role. We've seen increased project volume in our utility scale solar business and addressing the power needs of data centers now represent approximately a third of our active energy projects. And then our people ready skilled trades business has also seen an increase in revenue from the construction of data centers.

Carl

And just to add a little bit onto this and talk about kind of the P and L benefits that we're seeing of this work as well from a revenue perspective, as Taran just mentioned, you know, we've seen our skill business outperform the market with about 50% growth in Q1. From a cost and efficiency perspective, we're seeing positive trends in some of the important metrics we track. Our cost of delivery has gone down with revenue per headcount increasing. We've also seen increased fill rates and lower costs due to recruiter efficiency. So really we've seen kind of both top line growth and margin expansion as a result of AI opportunity.

Kartik Mehta (Equity Analyst)

And then just one last question, Taryn. Maybe just a pricing environment, you know, as a job market maybe isn't as tight as used to be. Are you seeing any pricing competition for any of the segments?

Taryn

I would say that we're seeing the typical pricing pressure that we would in this type of environment, not only from competitive forces, but also our clients are remaining very cost conscious during what remains an uncertain time. Our team's doing a great job of managing pricing decisions and continuing to look for ways to make sure that we're delivering enhanced efficiencies and values so that we can remain competitive across all of our service offerings.

Kartik Mehta (Equity Analyst)

Perfect. Thank you very much. I appreciate it. Thanks Darcy.

OPERATOR

Our next question, we'll hear from Mark Marcon with Bayer.

Mark Marcon

Hey, good afternoon and thanks for taking my questions and really nice to see the revenue growth. So good job there. Wondering if you can talk a little bit more about the elements of the revenue growth. So specifically on the energy side, can you please size that for us? Like how big was it this quarter this past quarter. How big was it a year ago?

Carl

Yeah, thanks for the question, mark. You know, our renewable energy business, as we mentioned, kind of more than doubled for the third consecutive quarter. Renewables is part of our skilled trades business within peopleready. You know, we've noted in previous quarters that our skilled businesses represent about a fourth of our staffing businesses. You know, with the significant growth that we've experienced, that's could be approaching about a third. So one third of both of both people ready and managed. Yeah, that's a good proxy across both of those segments. And a year ago it would have been a quarter of it. Yep.

Mark Marcon

Okay, so really good growth there. And then is the element that is tied to data centers increasing at an even faster rate or is it a fairly. I mean, obviously doubling is great, but I'm. And how sustainable or how long do you think the Runway is for that growth?

Carl

Yeah, no, I think we've got a really strong pipeline in our renewable business. We stay really close to our customers here, so I'd say solid pipeline in renewables. We have several projects expected to ramp in Q2, supporting our outlook for the quarter and longer term. We think that there's an incredible amount of need for energy in the space and we're well positioned to capture that.

Mark Marcon

And then can you talk a little bit about on the driver side, how big is drivers at this point?

Carl

That's about that third mark in the people management segment that we're talking about. One thing I will say and just add on to there is, you know, our commercial driver business has been doing well for us. We're in our ninth consecutive quarter of growth in Q1 and you know, it's been coming at a very challenging environment for transportation. A really encouraging sign for us is at the end of the quarter and into April, we saw an increase in our order volume which is going to provide some incremental growth opportunity for that. As really historically over the last couple years we've been talking about taking share in our managed offering. So this will provide some future growth in our flex and on demand side.

Mark Marcon

Yeah, I mean, according to our transportation analysts at our shop, transportation is actually starting to pick up. So if you've got a growing market and share gains, that's obviously a huge positive. And then with regards to the overall revenue guide, so you did 7% growth organically. You know, this quarter you're guiding to 2 to 8 on an organic perspective. Is there. What segments would you expect to slow?

Carl

Yes. So thanks. Great question. So it's kind of five Points at the midpoint. When we look at it, we should see some improvement in our people management as we had a slower quarter in Q1, a little bit in people solutions as well as we move into the quarter. And then for people ready, as we've talked about, our on demand is seeing, you know, good trends as we move into spring to summer, but we're starting to lap some of those really large quarter growths in our renewable business. So there's a little bit less growth coming in on that side within our peopleready segment.

Mark Marcon

Okay. So we're basically going up against tougher comps and so that's going to slow things down a little bit. So you're not expecting the energy business to continue doubling?

Carl

Not doubling, but we expect for it to continue to grow and grow sizably.

Mark Marcon

Okay. And then shifting to gross margins, just how big was the impact of the workers comp? I know it basically subtracted 220bps relative to a year ago. But what was the actual reversal last year and what did you experience this year?

Carl

Yeah, there'd be about 7 million differential in between the quarters.

Mark Marcon

And then can you talk a little bit about bill pay spread and like what percentage increase you ended up seeing in the bill rate and the pay rate?

Carl

Yeah, happy to Mark. Pay rates were up about 7.5% while bill rates were up 6.7%. So it led to about a 20bps decline in margin for the quarter. The pay rate increase was largely due to statutory minimum wage increases as well as it's been driven by some role specific skill scarcity rather than really general labor shortages. So you know, as Taryn mentioned earlier, while there's still some pricing pressure that we'd expect, we've been really disciplined in our pricing. And I'd also add what we typically see in the seasonality of our business is that bill pay spread gets better as we move into second and third quarter. And we're already starting to see that in April.

Mark Marcon

Okay, great. And then in terms of the actual, you know, sga, obviously it's projected to, you know, it'll be down relative to a year ago. How much more room do you have in terms of taking the SGA down, you know, relative to the midpoint of the of what you're projecting for the second quarter or how should we think about the incremental margin improvement as we go into the second half?

Carl

Yeah, here's what I'll say, Mark. Look, our adjusted SGA was down about 8% in Q1, and we continue to manage costs very Closely, we guided to about minus 7 year over year. So an improvement there. In Q2, we're guiding to a midpoint of 87 million or down 3%. That includes about, you know, 2 million or so of adjustments. So on an adjusted basis, that'll look more close to 85 million or down 4%. I think there's an important call out is just if you remember, on a reported basis, the prior year did include a 5 million benefit from government subsidies that we didn't expect to repeat. But overall, you know, we continue to manage our costs very closely, and we feel like with our optimized fixed cost base, we're poised for significant incremental margins and expanding profitability as we exit this lowest volume quarter in Q1 and the demand improves into the year.

Mark Marcon

Can you just elaborate a little bit on the incremental margins that you might expect during the second half?

Carl

Yeah, I think we're. I mean, we're expanded, you know, you know, we're looking double, you know, from our guide in Q2 here. And, you know, as we continue to move through the period, we'd expect to see incremental margin, but we got a quarter at a time, Mark.

Mark Marcon

Okay, great. Thank you very much.

Carl

Thank you, Mark.

OPERATOR

And as a reminder, please press star1 if you would like to ask a question. And next we'll move to Mark Riddick with Sidadi and Company.

Mark Riddick

Hey, good evening. Hi, Mark wanted to start maybe with. If we could talk a little bit about the partnership with the leading group purchasing organization that we refer to maybe, I guess, maybe in baseball's terms, what inning are we in as far as that opportunity? Are we sort of early stage? What do we think is the type of opportunity and what type of Runway we might have there? And then maybe you could also talk about the scope of it a little bit. As far as the reach, are we talking a nationwide reach? Is it a regional reach? What should we be looking at there?

Carl

Yeah, thanks for the question, Mark. We're just at the tip of the iceberg here, and we're very encouraged by the progress that we're seeing with this strategic partnership. It's driving new business opportunities and expanding our reach nationwide. As I mentioned in prepared remarks, we have secured approximately 11 million of annualized new business wins in the quarter, and the partnership continues to build momentum as we expand, expand the relationship both into new sectors and across all of our service offerings. We had a couple of recent wins with two nationwide retail stores with work that we expect to begin here in the next couple of quarters. So Overall, we're very excited about the strong pipeline of opportunities ahead with this partnership.

Mark Riddick

And then sort of along those lines, can you talk a little bit about the, you mentioned in your prepared remarks about the international growth. Maybe you could talk a little bit about the, the opportunity set there and maybe what we might see internationally. And then I have one last follow up.

Carl

Absolutely. As I mentioned, we won a deal with the UK law enforcement here in the last quarter in our people Scout business to support them with hiring. And this follows the landmark deal that we won in the UK to provide employees, your brand and Canada's attraction services for the UK Armed forces. Just as a reminder, that deal is in the transitionary phase now. We'll start to see the full value of that opportunity in the early part of 2027 in regards to the new law enforcement agency, when we'll start to see revenue come online here this year.

Mark Riddick

Okay, great. And the last one for me, maybe you could talk a little, shift gears over toward cash usage. Maybe you could talk a little bit about acquisition pipeline and appetite maybe if you're seeing things there and maybe what valuations look like as well as share repurchase appetite given sort of where we

Carl

are at this point. Thank you. Thanks, Mark. Yeah, look, we're focused on balancing ample liquidity first, making strategic growth investments into the business and then, you know, as we've historically done, returning excess capital to shareholders via those share repurchases currently with any excess cash. And as free cash flow improves through the year, we're looking to pay down our debt first. We continue to manage our fixed cost base down, our capital spends now under 1% of revenue. And with the business returning to organic growth, we'd expect to pay down our debt throughout the year. Just as you asked, kind of about share repurchases. They remain important but balanced with first maintaining a strong balance sheet. We've got about 34 remaining under our current authorization.

Mark Riddick

Excellent. Thank you very much.

Carl

Thanks, Mark.

OPERATOR

Currently there are no further questions. I would like to turn the floor back to Tara Owen for any additional or closing remarks.

Tara Owen

Thank you, operator. And thank you everyone for joining us today. I do want to take this opportunity to thank the entire TrueBlue team for their disciplined execution of our enterprise strategy and for their commitment to advancing our mission to connect people and work. We look forward to speaking with you at upcoming investor events and on our next quarterly call. If you have any questions, please don't hesitate to reach out. Thank you.

OPERATOR

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

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