Greeting and welcome to the TrueBlue Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. An interactive question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d like to turn the conference over to your host Mr. Derrek Gafford, CFO of TrueBlue. Thank you. You may begin.

Good afternoon, everyone, and welcome. I’m here with our CEO, Steve Cooper. Before we begin, I want to remind everyone that today’s earnings call and slide presentation will contain several forward-looking statements, all of which are subject to risks and uncertainties and we assume 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 in our SEC filings could cause actual results to differ materially from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. Please refer to the non-GAAP reconciliations on our website at www.trueblue.com under the Investor Relations section. Also, any comparisons made to other periods today are based on a comparison to the same period in the prior year unless otherwise stated. As we discussed in October, our fiscal 2016 fourth quarter includes a 14th week, and we moved the quarter ending date forward two days from January to Sunday, January 1, to better align with the workweek of our customers. To facilitate comparison with prior periods and with the outlook we previously provided on a 13-week comparable basis, we’ll be referencing both GAAP and comparable 13 and 52-week results. We will use the term GAAP for generally accepted accounting principles when referring to the 14th week or 53-week results ending January 1, and the term comparable when referring to the 13-week and 52-week results. Due to the previously announced reduction in the use of our services by our largest customer, Amazon, we will also be providing comparable results excluding this customer. We believe, both sets of comparable results are complementary to our GAAP results and helpful in understanding the underlying trends in our business. The revenue for the nine additional billing days was $34 million.…

Thank you, Derrek, and good afternoon, everyone. Our earlier expectation was that revenue trends would worsen during the fourth quarter, given the strong prior year performance in Q4. However, due to strong momentum across all business segments and PeopleReady, in particular, we exceeded the outlook we provided in October. We’re also pleased to report that the comparable monthly organic revenue trends, excluding the loss of revenue from Amazon showed consistent improvement. The improvement was largely driven by PeopleReady, our branch-based industrial staffing business and was widespread across most all geographies and across all business sizes, including our large national customers. Our comparable 13-week revenue, excluding results from Amazon grew by 5% compared to the prior year. We’re also pleased to have maintained strong adjusted EBITDA margins, despite the decline in the total revenue. Our adjusted EBITDA margin on a comparable basis was up 5.8%. It was at 5.8%, up 10 basis points over the same period last year. We continue to emphasize disciplined pricing to optimize our bill and pay rate spreads. And we continue to focus on containing costs across all business units, along with driving synergies in our acquired businesses in order to keep the momentum of improving our EBITDA margins, which remains very important to us. Our acquisitions are performing better than our original expectations. We acquired SIMOS at the end of 2015 and Aon Hewitt’s RPO service line at the beginning of 2016. We’re pleased – we’ve been pleased that these acquisitions have exceeded expectations from a profitability, customer retention, and employee retention perspective. Commencing with the fourth quarter, we are now reporting on our business as three distinct segments: Specialized staffing, which is operating as PeopleReady; Workforce Management, which is operating through four brands within our PeopleManagement segment; and recruitment process outsourcing, which is operating…

Thank you, Steve. I’ll start off by covering the results on a GAAP 14-week basis and follow-up with a summary of our key results on a comparable 13-week basis, followed by a supporting discussion of our operating trends. I’ll follow-up with a discussion on our three segments and finish off with an update on our liquidity position before I share our outlook for the first quarter. On a GAAP basis, revenue for the fiscal fourth quarter declined by 9% and net income was $18 million, or $0.43 a share. Our results for the quarter boiled down to this. We posted stronger than expected bottom line results, driven by higher than expected revenue. On a comparable 13-week basis, adjusted EBITDA and net income per share of $41 million and $0.58, respectively, led to high-end of the comparable 13-week outlook provided in October. Comparable 13-week revenue was $702 million, which exceeded the high-end of our comparable outlook of $686 million provided in October. The better than expected revenue performance was the result of two factors. One, improving comparable organic revenue trends, excluding Amazon, which were as follows: October was down 6%, November was down 4%, and December was flat. Additional holiday-related business provided about 2 percentage points of benefit to December. And second, we expected to transition the former Spartan and CLP branches to a new operating system during the fourth quarter, which we elected to delay until after the holiday season. Our Q4 revenue outlook included about $8 million of headwind for this transition, or about 1 point of revenue headwind. I also want to provide some color on the results from Amazon. On a comparable basis in 2016, Amazon contributed about $170 million of revenue and $5 million of adjusted EBITDA, compared to 2015 revenue of $350 million and adjusted…

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Randy Reece from Avondale Partners. Please go ahead.

Good afternoon.

Hi, Randy.

I wanted to discuss and get a little better understanding of – you’re going from – it looks like comparable revenue growth in the mid single digits in the fourth quarter and then the guidance is for year-over-year decline in the first quarter. I’d like to get some components of the underlying trends representing that change?

Yes. Thank you for that. The growth in the comparable revenue was really driven by the acquisitions of SIMOS and Aon. On an organic basis, our results in Q3 and Q4 were about negative 3% and that’s about where we’re heading into the first quarter also.

Okay. So that’s a very similar trend. Do you sense any difference in how quickly the customers have restarted production – restarted operations in the beginning of the year compared with a year ago as you stacked through the holiday idleness?

I understand that. Yes, that’s about the same a year ago. We’re not seeing a lot of environmental differences similar, yes, it’s very similar that the minimum wage increases always cause our PeopleReady group to hesitate a bit as they’re pushing through larger minimum wage increases and but that’s similar to year ago also. And so I think, as we closed out January, things are feeling very similar to a year ago.

So, the number of markets with minimum wage increases is comparable year-over-year?

Hi, Randy. I’d say that the number of market is comparable. It’s more concentrated in California this year compared to what we have seen in the past. So we’re starting off this year. California has a $0.50 pay increase for the state overall. But there is roughly just a little south, what’s called about 10 cities that have some pretty sizable increases from a $1 up to $2. So most of the pressure as far as getting our markup pass-through will be in the state of California early on. As you know, the challenge for us isn’t getting the cost pass-through, or necessarily the burden – the payroll tax burdens on costs. Our customers understand that they have that in their own businesses. It’s to keep our margin whole, at least, in the PeopleReady business. There’s a markup of about 40% put on top of that and that’s the challenge that we have in pushing these through. a :

My last question is when I look at the impact of Amazon on the comparisons, does it affect any other segment and the PeopleManagement segment?

No, it’s all in the PeopleManagement segment.

Great. Thank you very much.

[Operator Instructions] And if there are no further questions, I’d like to turn the floor back over to Mr. Cooper for any closing comments.

Well, thank you. We appreciate you joining us today to hear the explanations of our operating results of Q4, and most importantly, this longer-term strategies that we’re working on that we’ve talked about here today. We look forward to updating you as we get to the end of Q1. Thank you.

This conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.