TrueBlue, Inc. Q2 FY2025 earnings call

• Viewed the prolonged industry downturn as an opportunity to build long-term competitive advantage by leaning into core differentiators such as streamlining operations, expanding into high-growth and underpenetrated end markets, increasing the mix of skilled and professional roles, accelerating digital transformation, diversifying revenue streams, and eliminating nonessential costs. - Described TrueBlue as a leading provider of digitally enabled specialized workforce solutions, partnering with over 55,000 customers and more than 300,000 workers annually, with a national footprint including approximately 500 branches, hundreds of on-site locations, and tens of thousands of client work sites. - Highlighted strategic actions like optimizing the sales function with a territory-based go-to-market structure, deploying Salesforce CRM, launching an enterprise-wide strategic partnership program, expanding into high-growth end markets like health care, professional roles, and energy, and undergoing digital transformation with AI-powered job matching and other technologies. - Achieved approximately $90 million in permanent SG&A savings from the 2022 base through simplifying the organizational structure.

Total revenue for the quarter was $396 million. PeopleReady revenue declined 5% due to reduced client volumes across most verticals and geographies. PeopleManagement grew 2% for the second consecutive quarter, driven by strong results from the commercial drivers business. PeopleSolutions revenue grew 20%, with HSP contributing 40 percentage points of inorganic growth, offsetting the segment's organic decline of 20%. PeopleReady segment profit margin was up 50 basis points, PeopleManagement segment profit margin was up 50 basis points, while PeopleSolutions segment profit margin was down 320 basis points.

• Expect revenue growth of 5% to 11% year-over-year in the third quarter, which includes 4 percentage points of growth from the acquisition of HSP. - Recognized the seasonality of the business, typically seeing the highest volumes in the second half, and the lean cost structure is expected to drive additional margin improvement as the year progresses.

• Industry uncertainty and client caution have weighed on the staffing industry, leading to suppressed temporary labor and permanent hiring volumes. - Faced pricing competition and market demand unpredictability as clients navigate an unpredictable business landscape.

Q: Give a little bit more color on monthly trends in terms of how they tracked over the past few months, including into the current quarter. And I think, Carl, you talked about some green shoots. Maybe we can get a little bit more color there as well.

A: Taryn mentioned being very encouraged by the momentum across the business, with double-digit growth for skilled businesses, overall signs of stabilization, and a return to company-wide growth expected in the third quarter. Carl noted PeopleReady saw low single-digit weekly sequential revenue growth throughout the quarter, exited Q1 at minus 8% and Q2 at minus 3%, and returned to growth in July, with weekly trends in line with the quarter's outlook. Also, commercial driver services continued to do well with its fourth consecutive quarter of double-digit revenue growth.

Q: Since you last reported, the company received an unsolicited buyout offer from HireQuest. I know your Board quickly rejected that. But can you talk about the reasons underlying that decision? And have you had any discussions with HireQuest since that time?

A: Taryn referred to public disclosures regarding HireQuest, stating the Board is focused on maximizing value for shareholders and will consider any approach to do so, and the team has positioned TrueBlue to take advantage of market drivers as the industry recovers and will act in the best interest of shareholders.

Q: Taryn, you talked a little bit about third quarter being a positive quarter, seeing growth for the overall company. And I think, Carl, you talked about PeopleReady seeing some positive momentum in July. And I'm wondering, do you finally think we're at a point where now the company can sustain some revenue growth? Or is there anything unique happening in the third quarter, which would make you cautious?

A: Taryn was encouraged with the momentum coming into the third quarter and signs of overall stabilization, with teams focused on securing new wins and expansions, but customers still need more certainty to feel confident planning their workforce needs. Carl mentioned from a bill rate and pay rate spread perspective, pay rates were up 1.2% in the quarter, bill rates up 1.8%, leading to about a 10 bps improvement in margin, and Taryn added about the new feature in the JobStack platform where nearly 100% of price quotes offered through the tool have been accepted since launch.

Q: Just any type of pricing competition? I think the last quarter, you talked a little bit about some pricing competition. I'm wondering how that's trended this quarter.

A: Carl said there are always some pricing conversations, but pay rates were up 1.2%, bill rates up 1.8%, leading to about a 10 bps improvement in margin, and Taryn added about the JobStack feature where nearly 100% of price quotes offered through the tool have been accepted since launch.

Q: Could we get monthly trends for PeopleManagement and for PeopleSolutions exclusive of the acquisition?

A: Carl said PeopleReady was kind of minus 8%, minus 3% and 3%, and PeopleManagement had similar continued trends, kind of plus 3%, plus 4%, flattish in June and then returning to growth in July as well.

Q: Are there any regional differences that you're seeing? Any differences between Cali versus Texas versus Florida?

A: Carl said saw improved trends in Florida and California during the quarter, and Texas was doing better than reported at a segment level, with manufacturing and construction industries seeing a small improvement from Q1 to Q2 as well.

Q: You actually touched on a couple of things already, but I wanted to circle back. You made mention kind of about the -- some new features being introduced. And maybe you could talk a little bit about some of the opportunities that you see there, either new features on JobStack that have just been rolled out or that you're planning to roll out and client receptivity and how that's -- and how much that fuels the optimism of organic growth expectations.

A: Taryn said they are excited about the proprietary JobStack app that allows addressing customer feedback quickly, with the road map focused on delivering a better customer experience, including the pricing estimate feature being well received, helping improve sales effectiveness and operational efficiency, and the PeopleReady matching technology improving fill rates, with a win in a remote location with a large food services customer as an example.

Q: So you actually touched on a couple of things already, but I wanted to circle back. You made mention kind of about the -- some new features being introduced. And maybe you could talk a little bit about some of the opportunities that you see there, either new features on JobStack that have just been rolled out or that you're planning to roll out and client receptivity and how that's -- and how much that fuels the optimism of organic growth expectations.

A: Taryn said they are excited about the proprietary JobStack app that allows addressing customer feedback quickly, with the road map focused on delivering a better customer experience, including the pricing estimate feature being well received, helping improve sales effectiveness and operational efficiency, and the PeopleReady matching technology improving fill rates, with a win in a remote location with a large food services customer as an example.

Q: I was wondering if we could talk a little bit about maybe your thoughts and views on candidate availability and the skill availability out there and that's changed much since the beginning of the year or if you're seeing any pockets that might be worth calling out there.

A: Taryn said there hasn't been a significant change in candidate availability, fill rates still remain high, and there are workup and apprenticeship programs to help expand the talent pool, particularly in skilled trades and energy, which are similar to historical.