TrueBlue, Inc. Q3 FY2025 earnings call

• Third quarter performance exceeded expectations with business trends stabilizing and progress on growth strategy. • Energy sector revenue more than doubled, commercial driver business had fifth consecutive quarter of double-digit growth. • Executed operational discipline, reduced SG&A by 8% while growing revenue. • Integrated digital platform enhancements for workforce solutions, highlighted price estimate feature in PeopleReady JobStack. • Optimized and expanded sales function, transition to territory-based go-to-market structure driving improved results. • Strengthened strategic partnerships, including with a leading group purchasing organization and collaboration between brands securing large deals. • Expanded share in high-growth markets, e.g., HSP expanded into 3 new states, RPO solutions expanded in engineering and technology verticals.

PeopleReady grew 17%, driven by heightened demand in the energy sector with revenue more than doubling in the energy vertical. PeopleManagement grew 2% for the third consecutive quarter, driven by the commercial driver business which delivered its fifth consecutive quarter of double-digit growth. PeopleSolutions revenue grew 28%, with HSP performing in line with expectations and contributing 39 percentage points of growth, offsetting the segment's organic decline of 11%.

• Expect revenue growth of 4% to 10% year-over-year in fourth quarter, with HSP contributing 4 percentage points of growth. • Sublease agreement for Chicago support center unlocks over $30 million of cash flow over remaining 10 years of lease, optimizing fixed cost structure.

• Customer sentiment remains cautious due to ongoing uncertainties. • Mix of tailwinds and headwinds from immigration reform, e.g., Southwest region has new customers focused on compliant workforce but ICE activity leads to higher absenteeism among staff even when E-Verify compliant.

Q: Maybe we could start with the strength that you're seeing, the improvement in on-demand that you shared in prepared remarks. Maybe you could talk a little bit about maybe parse that a bit as to how much of that is being driven by the PeopleReady sales territories initiative and maybe how much of that is sort of just general broader market demand growth?

A: We continue to see strong performance across our sales-enabled territories and throughout our on-demand organization with metrics that highlight both sequential growth and year-over-year profit improvement. Our sales-enabled territories saw stronger sequential growth versus the comp group, and we saw improved profitability in those territories. We have increased our sales capacity by 50% this year and aligned those sales reps in high-value MSAs. Added a new Head of Sales to our PeopleReady on-demand business with over 25 years of sales, operations and growth experience.

Q: Just a follow-up on that line of questioning. There's still a lot of uncertainty out there in the marketplace. I'm just wondering from a conversational or tone perspective, what are your clients telling you? Are things getting a little bit more certain or less uncertain? I'm just curious what they're saying.

A: We're seeing early signs of momentum and a return to growth among some of our clients and geographies. Generally, we understand an inflection point when we're hearing from our customers that they need staff. But I would say, overall, that the customer sentiment remains cautious due to ongoing uncertainties. So it's certainly still a cautious environment.

Q: Carl, you've made a lot of progress on the SG&A leverage. And I know we've talked about this in the past, but as revenue stabilizes, how much incremental margin expansion would you expect before you have to start reinvesting in the business? I know Taryn said you've hired some salespeople. So I guess I'm trying to figure out maybe capacity and margin opportunity before you have to start reinvesting.

A: We've done a really good job kind of managing costs and controlling what we can in this market. Q3 was a good example of our abilities to drive incremental margins. We ended up delivering better incremental margins here in this quarter based on increased revenue than we thought in our guide. We feel like with our cost actions, we'll do north of that. We will continue to look for opportunities for growth, investing in sales and other areas to drive the top line. But we feel like with our optimized fixed cost base, we're poised for significant incremental margins and expanding our profitability as demand rebounds.