Thank you for calling and welcome to the TrueBlue third quarter 2019 earnings call. I will now turn the call over to Derrek Gafford, Executive Vice President and Chief Financial Officer. Please go ahead.

Good afternoon everyone and thank you for joining today's call. I am here with our Chief Executive Officer, Patrick Beharelle. Before we begin, I want to remind everyone that today's call and slide presentation contains 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. We use non-GAAP measures when presenting our financial results. We encourage you 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, we will be providing a copy of our prepared remarks on our website at the conclusion of today's call and a full transcript and audio replay will also be available soon after the call. With that, I will turn the call over to Patrick.

Thank you Derrek and welcome everyone to today's call. We appreciate you joining us. Strong execution drove better than expected topline and bottomline results this quarter. While revenue growth has yet to return, we were pleased to see monthly revenue trends were consistent during the quarter and we delivered another quarter of earnings growth. TrueBlue has been driving digital disruption within the staffing industry with our JobStack and Affinix offerings and we continue to experience favorable employee and customer adoption. We remain squarely focused on client expansion and retention, disciplined cost management and investing in our digital strategies to differentiate our service offerings. We also announced today that our Board of Directors approved an additional $100 million of share repurchase. Our Board remains highly supportive of our focus on opportunistically repurchasing shares and returning capital to shareholders. Now I would like to update you on the financial results and strategic initiatives within each of our segments, starting with our largest segment, PeopleReady. PeopleReady is the leading provider of on-demand labor and skilled trades in the North American industrial staffing market and represents 62% of trailing 12-months total company revenue and 59% of segment profit. PeopleReady's revenue was down 4% during the quarter due to lower business activity across our client base. Growth at PeopleReady was favorably impacted in Q3 by project work at one of our clients creating a 2% year-over-year growth benefit. Excluding the project work I just mentioned, underlying monthly revenue trends at PeopleReady were consistent throughout the quarter. Consistent with our focus on managing costs across the business, we have been taking a hard look at PeopleReady's cost structure. Since our last earnings call, we have taken cost actions that are expected to result in approximately $10 million of net annualized savings. It's important to note that…

Thank you Patrick. Total revenue of $637 million was at the high end of our $613 to $638 million outlook. The better performance was driven by $11 million of benefit from project work with one client that was not anticipated in our Q3 outlook. Total revenue was down 6%, which was larger than the decline in Q2 of 4% due to the anniversary of the TMP acquisition in Q2. Organic revenue was down -6% which was consistent with the decline in Q2 of this year. Excluding the project previously mentioned, monthly revenue trends were consistent during the quarter. Turning to the bottomline. Net income per diluted share of $0.68 exceeded the high end of our $0.50 to $0.60 outlook and adjusted net income per diluted share of $0.76 also exceeded the high end of our $0.61 to $0.71 outlook. EPS was up 11% and adjusted EPS was down 4% on top of strong EPS and adjusted EPS growth in Q3 last year of 20% and 32%, respectively. The better than expected EPS and adjusted EPS results were primarily due to the revenue beat and a variety of cost management actions. In addition, the effective income tax rate for the quarter of 10% was below our 14% expected rate due to additional Work Opportunity Tax Credits. Gross margin of 26.6% was down 50 basis points primarily due to higher workers' compensation expense and the previously disclosed headwinds at PeopleScout. Workers' compensation expense as a percentage of revenue this quarter was consistent with Q2 this year but higher than Q3 last year. SG&A expense was down $14 million, $3 million of which is due to lower adjusted EBITDA exclusions and the remainder due to a variety of cost management actions. SG&A was down 10% and SG&A as a percentage of revenue was…

[Operator Instructions]. Your first question comes from the line of Josh Vogel with Sidoti & Company. Please go ahead.

Thank you. Good afternoon guys. My first question, Derrek, you mentioned, there was some roll-off in Q4 from that large project at PeopleReady that contributed $11 million of additional revenue. What is your expectation for the contribution from this project in Q4 that's built into your guidance?

Yes. Hi Josh. We expect it to be about half that rate. So that roll-off contributing about one point of revenue headwind, additional revenue headwind, in Q4 because the roll-off, call it $5 million to $6 million less in revenue.

Okay. Great. So I know you continue to invest in digital strategies and for good reason and now that we are nearing the end of the year, I was just curious how you feel on this front entering 2020? How much more you planning to invest in these offerings, if at all? Or do you feel the capabilities are fully there are and now it's just about scaling them up further?

Hi Josh, this is Patrick. A big part of our focus in the fourth quarter and in 2020 is to leverage the phenomenon that we have seen of clients that are heavy users of JobStack. We have seen disproportionate growth for those clients that are using JobStack in a heavy way versus those that are using it in a moderate way or not using it at all. So a big part of our investments in Q4 and 2020 is around sales and marketing campaigns to target our existing client base to use the tool more because as I mentioned earlier, we have seen disproportionate growth. You have north of 20% year-over-year growth in those clients that are using it heavily. We are also making some investments around the acquisition of talent with the tool. So we are going to rolling out some new features in the first quarter that we think are going to help drive more candidate flow. So we are looking at this from two ways, both from a supply perspective and from a demand perspective. So those would be the areas of focus. Just to put in perspective some numbers for you, as we think about 2020, we finished the year or we will finish the year somewhere around 45% or so of our fills coming in a digital way. We think we can get that number closer to 55% by the end of 2020. We will finish the year around 21,000 clients on the tool. We think we will get closer to 30,000 by the end of 2020. Shifts, we will do around four million or so this year. We think we can get that number north of five million. So these are some goals that we have set for ourselves in terms of 2020 and continuing progress on our digital strategy.

Okay. That's helpful. Thank you. Just looking at some of the -- well, you had a repricing of an account at PeopleScout. And I was just curious, were there any other notable or sizable clients, whether within PeopleScout or maybe PeopleManagement, who you are currently gauging or exploring similar type of repricing arrangements?

Well, anytime a client comes up for renewal, there is conversations around repricing. I wouldn't say there is any outside the normal course of business, Josh. So I wouldn't expect us to be making announcements about significant price concessions or price increases. It will be more normal course of business.

Okay. Great. And if I can just sneak in one more. Nice to see the cost reduction efforts that will results in, I guess, about $8 million in net annualized cost savings next year. Is that something that you think will be spread out evenly over the course of the year? Or will it be more backend heavy?

Hi Josh, it's Derrek here. Yes, that will relatively consistent through 2020.

Okay. Great. Thank you for taking my questions.

And your next question comes from the line of Kevin McVeigh with Credit Suisse. Please go ahead.

Great. Thank you. Patrick, how are you?

Doing great. Thanks Kevin.

Just one question, maybe for Derrek. So Derrek, just one point of clarification. Was the $11 million kind of the one-time revenue, was that contemplated in the guidance at the time you issued it? Or did that kind of come in after the guidance has gotten issued?

That came in after the guidance was issued, Kevin. Our job is just to run the business we can based on that any set of circumstances that are coming along economically. And when we set the guidance, that's what we know of at that point in time. Now we have been doing, of course, some analysis and had some ideas about some things that we wanted to do, but really that work picked up after the guidance was issued.

Got it. And is there any way to frame, is it the type of thing where the incremental margin on that would be high? Or was it consistent with what the corporate average is overall?

Well, give that to me one more time on the cost because I am not following you on the margin piece. We have got the dollars.

I guess on the revenue side of it, were a margins associated with that $11 million of revenue consistent with the corporate average in the quarter? Or was it kind of maybe a little bit higher given -- just trying to get a sense of what the margin profile of that revenue stream was?

Well, you should think about it this way. Those cost savings, it didn't come from variable cost reductions associated with revenue declines or anything like that. That $11 million that we are talking about for 2020, by the way, we are going to be reinvesting $3 million of that. So we would deliver $8 million of net or just cost reductions that we have made broadly across the business. Now maybe you are referring to the margin on the extra project work?

Yes. That's right, Derrek.

Okay. Now that's, well it's a little bit above the average, but right at the PeopleReady blended average incremental, standard incremental for PeopleReady, mid-teens.

Got it. And then you said this and I apologize, it was muddled on call, my line. The 150 basis points of margin erosion in the next quarter, was that a functional of the revenue or was that workers' comp? Is there a workers' comp dynamic that maybe just I didn't hear that, if you could just refresh me on that?

Sure. Well, we are expecting the gross margin -- gross margin in Q3 this year versus Q3 last year was down 50 basis points, partly because of workers' compensation and then partly because of the mix on some of these client headwinds that we have talked about. As we go to Q4, we are expecting the year-over-year gross margin to be down about 80 basis points or I will call that 30 basis points of more incremental decline. And that's largely tied with payroll taxes. We had some payroll tax benefits that we trued up at the end of 2018 and we have some more in 2019. We have been realizing that benefit every quarter. So that's mostly timing on the gross margins. And then you have got the extra two points of revenue decline and the deleveraging that comes along with that. And then on the SG&A side, we still have a nice SG&A decline built-in but it's not quite as large as what we had in Q3, somewhat because of the extra charge we are taking on these cost savings that's in our guidance of $2 million.

Helpful. And then just, it sounds like there was kind of a little bit of step-down in terms of couple, 100 to 200 basis points. Where are you seeing that? And I guess just within the context of, there has been so much debate on the macro, Derrek, does that feel more like kind of a traditional pause or something that's kind of in the initial stages or something maybe a little bit more that you monitor?

Well, I will talk about this last step-down that we saw and that we incorporated in the guidance towards the end of my answer, Kevin. But just to kind of reframe the answer of addressing your bigger picture question, this has been an interesting year because we have seen really three step-downs this year. We saw one at the end of March and first week of April. We saw one during the first couple weeks of July. And also in the first couple weeks of October. And what's been interesting about it is it's has been both at our PeopleReady business and in our PeopleManagement business. And it really shows up in our same-customer trends in our PeopleManagement business. So we don't think that -- well, we have always got room for improvement here. We don't think that there is anything that we are doing different in the business model. So we really do think this is macro driven. When it comes around to how we run the business and look at that, we are just going to continue to make the right adjustments as we see those step-downs. Our take with customers is that, everybody remembers the last recession and it snuck up on everybody and everybody is watching these economic signals very closely and trying to make real timely adjustments to their workforces. And we believe that's what we are experiencing in our trends as we look at the business. In regard to your specific question about the most recent step-down, it was both at PeopleReady and at PeopleManagement. Again, at PeopleManagement same-customer demand trends. No lost clients. On the PeopleReady side, it was a fairly broad-based, across a variety of geographies and customer types and sizes. If you had to pick one, those that will sit out the most, it would be in the construction area for PeopleReady. So I hope that gives some more color to our thoughts.

Thanks. Super helpful, Derrek. And then just if I could and I will get back in, in the interest of time. On the construction side, was that kind of the residential or the commercial? And then just, is any of it maybe an impact from GM and/or Boeing that maybe comes back? Or do you think this again the initial phase of may be something and tariff related or is it -- because I am sure there is a lot of uncertainty out there. Is it tonality, I guess, of the conversation? Is it more something you think that's a little longer in duration or something that again, after you had Boeing, you had General Motors. You obviously had the tariff crosscurrents. And is it any state specific or just pretty broad?

It's pretty broad. And in answer to construction, it was both in residential and in non-residential. But non-residential has the biggest impact to us. It makes up two-thirds of our construction business. And thinking about how long is this and how does this carry itself on, it's a really hard question to answer, Kevin. I don't know really the answer to that one. There are a lot of things going on out there from trade policies to manufacturing data and a variety of other things. So we will just continue to keep our eyes really closely on it and stay really and very in touch with our customers, serve them well and make adjustments as best we can to both preserve the profitability level of the company, but at the same time, fund investments for 2020 when it comes to customer and candidate acquisition and retention.

Understood. Nice job in obviously a tough environment.

And your next question comes from the line of John Healy with North Coast Research. Please go ahead.

Hi. Thank you. I wanted to ask you guys to dive in a little bit more about the Uber relationship. I apologize, but did you guys call that a joint venture? Is that a partnership? Is that a business relationship? Just agreement? We are trying to understand the structure of how you are working with them? And then additionally if the payrolling opportunity that you are working with them on, if that is exclusive, if it has an update on a ceiling to it or an upward range of how fast that can roll out as well?

Thank John. This is Patrick. In terms of our relationship with Uber, think of it as a business relationship where Uber is a client of ours. And in terms of the impact to TrueBlue, we expect the near-term impact to be relatively small. As you might imagine, the degree of impact on TrueBlue, it's directly related to the pace of scaling and the degree of success at Uber Works ultimately has in the marketplace. We started in Chicago. We will be expanding to other cities soon. Our vision for the partnership is really straightforward. We believe the light industrial staffing market along with some adjoining staffing verticals are ripe for digital transformation. As you know, we have been investing heavily in our capabilities and are seeing firsthand in the early stages of that transformation. So we are pretty confident in the digital capabilities that we have rolled out in our business via JobStack. And it is a best-in-class solution and ultimately we think will drive above-market growth. One important point to note about this relationship with Uber is that when you study other industries that have been disrupted, oftentimes the pie has gotten bigger. A good example is Uber in the cab dispatch business. End-user behavior changed and created a bigger pie. And we think that there is elements of that phenomenon here as well. So what's in it for TrueBlue with the partnership? First is, if Uber Works proves to be successful, this will be lucrative for TrueBlue and we will profit from the partnership success. There is the obvious revenue and EBITDA lift that would come from the services that we are providing. Secondly, by partnering with a nimble and an innovative company like Uber, we think there is some practical learnings that will accrue to both companies. We have already seen some of that happen already. And then thirdly, we view Uber Works as an anchor client. And should we decide we want to launch employer of record services to other companies with similar needs, we have that additional optionality in it in terms of a referenceable anchor client to jumpstart that effort. Related to your question on, is this an exclusive relationship. We are one of two with a much larger partner among the two. And so it's not completely exclusive but it's limited to two firms that are providing support with us being the larger of the two.

Great. And Along those same lines and I don't want to get too much into the world of science fiction, but if you thought about Uber and Lyft in kind of the ride-hailing, it is a digital category in itself, is there any interest or are there any talk about potentially working to become the employer of record for those potential drivers that are on those platforms? I know in some states there is some legislative battles that might be starting up. I was just curious, if you guys have studied that part of the market and if that is something that potentially could be on the horizon for the company?

Well, I would just say this, I wouldn't rule it out. We have certainly taken a look at it. We want to be prepared should that eventuality come. But I don't we are ready to make any pronouncements on that yet. Certainly there could be a pretty significant business opportunity there down the road.

Understood. And then just a final question for me. As guys look at the calendar for the fourth quarter, is there anything worth noting in terms of the days or the way the holidays fall? And just how you think about weather and the pluses and minuses, how those things add up to the fourth quarter? Thanks.

Well, the one thing that I will mention is that there would be a slight benefit this time around with, slight less benefit because Christmas falls on Monday versus a Sunday last year. So there could be a slight negative impact or excuse me, I got my dates wrong. It falls on a Wednesday versus a Tuesday. So it is a little bit more during the middle of the week versus the earlier part of the week. There could be a slight amount of that headwind from that. But nothing significant worth calling out, John.

Thank you guys.

And your next question comes from the line of Henry Chien with BMO. Please go ahead.

Hi guys. Good afternoon. I wanted to ask about the planned cost cuts and investments. I am just wondering if you could talk a little bit more about sort of where you are finding the efficiencies and planning to invest in? Thanks

Thanks Henry. Yes, the cost cuts that we made were in the PeopleReady organization and specifically, I will start by where we did not cut. We did not make any cuts in our branch organization. In fact, we are adding some resources in that area. So folks that are working with workers and working with clients on a day-to-day basis, there were no cuts in those areas. We made a number of cuts more the senior levels in terms of the leadership team and one and two layers down from that organization. So we are flattening the organization, bringing the leadership team closer to the field organization. We also received some concessions from some of the vendors that support us as well. So it wasn't all in the area of headcount reduction. It was a pretty broad-based look where we could make some cuts that wouldn't necessarily impact our clients or our workers. So those were the areas of focus, Henry, in terms of areas that we cut. In terms of investments, one of the challenges that we have had over the last couple of years has been around our client count. We have done a pretty good job from a pricing perspective of keeping up with wage increases and pricing that in. We have done a pretty good job of retaining our clients. But one of the things we haven't done as good a job in is going out and acquiring new clients and then hanging on to them in the early days. Those who have been with us for a long time, we have done a good job with. But the early days is where we had some challenges. And so what we have done is, we have made a multimillion dollar investment in a team that's focused on onboarding our clients and making sure that they get off to a really good start. And then once they are onboarded, we have also made some pretty significant investments in the area of expanding wallet share within those clients and making sure that they get signed up on JobStack and are using it in a heavy way. And so we rolled that team out in the third quarter and early days. It's been really successful. In fact, we are probably going to be expanding the size of that team based on the early results that we have had. And so we have carved out about $3 million of the cost savings that we had and we are looking to reinvest in our sales and marketing capabilities aimed both at new clients as well as within our existing install base. And so those are the areas of focus.

Got it. Okay. Great. That's helpful. And just on PeopleManagement. Just looking at the business. I mean it appeared to be facing some pretty significant headwinds, both on pricing and volume. Just kind of curious like where are you seeing the new business and why is it worth continuing to expand that business unit?

Well, we are actually pretty bullish on PeopleManagement right now. We have had a number of wins in that business. In fact, our wins are up more than 20% on a year-over-year basis. And these are multiyear contracts with very large companies. And so we are feeling pretty bullish on that business after, you rightly point out, a couple years of pretty unimpressive revenue growth and margin profile. So we like the pricing we have put in place is solid on these new deals and these are large companies that are signing up to multiyear engagements. And so as we look into 2020 and beyond, we see that business returning to growth.

Got it. Okay. Makes sense. Col. Thank you.

And our final question comes from the line of Mark Marcon with Baird. Please go ahead.

Hi Patrick. Hi Derrek. Just wondering, with regards to the workers' comp, what's the underlying reason why the workers' comp went up?

Hi Mark. It's Derrek here. Our run rate this year has been quite consistent. Matter of fact, workers' compensation as a percentage of revenue during the third quarter was the same as it was in the second quarter. It's just that in the third quarter of last year we had the benefit from reductions to prior period reserves that was larger than normal and took that down to our lowest point that, I believe, we have ever had unless we have done an EBITDA exclusion and certainly the lowest point during the 2018 fiscal year.

Got it. Okay. Great. And then with regards to PeopleReady just in terms of the trends that you are seeing in the business, could you describe outside of the construction areas what you are seeing? Is there any light at the end of the tunnel? And also could you talk a little bit about what you are seeing in terms of, with minimum wage increases having gone through, how is that impacting demand and just how hard is it to fill some of the positions?

Sure. So if we are talking about PeopleReady from a trend perspective, certainly manufacturing has been a very heavy headwind. So to put into perspective, in Q1 of 2019, we were down about 2% manufacturing. During the third quarter, we were down about 15%. In my earlier comments, there is a little bit of additional pressure coming from construction in the early parts of the fourth quarter. But overall, construction for the most part held up pretty well in the first two quarters. We are also seeing pressure in the transportation industry. That business is down low double digit, let's call it minus 12%, minus 13%. And then we have got some other businesses. If you take out some of the retail noise that we have had in the business particularly this last project that we just did in Q3, retail in the PeopleReady business has actually been holding up quite well. I mean we were mid single digits as far as growth there. So there is some resiliency for us in that business. When it comes to minimum wage increases, the last set of minimum wage increases this year was in California. Those have been the toughest because those have been sizable increases that have been happening year-after-year. So those are tough cost for businesses to take on year-after-year. We typically see a little bit of pressure of that in the early parts when it first comes through and then that moderates three or four months afterwards and we recover on the volume. And I would say that that's the way this has been running its course. As far as minimum wage increases for next year, we are still in the process of assessing that. But I wouldn't be surprised if it was relatively close to the minimum wage increases that we had this year, which was roughly $10 million with minimum wage increase that we pushed through. Filling open requisitions with people, it's still quite tough. We are in an environment here where businesses are really looking at their workforces and where they oftentimes go first is the contingent space. That's only 2% of total unemployment. And that's why you are seeing, of course, more of that headwind in the staffing businesses than you are at the overall employment numbers. So if you take that with fill of an economic workforce, that's pretty much fully put the work, it is a challenging environment to fill those positions given what's going on.

But I mean, when you think about kind of the overall macro environment, it has been soft and softening throughout the year. Obviously, as you start looking towards next year, what are the factors that you would say would make you feel more optimistic or less optimistic about the trajectory and potentially hitting an inflection? Because it sounds like you are doing well on JobStack. It sounds like you have got some contracts lined up on the PeopleReady side. So how are you thinking about that and also just deploying the capital on the buyback?

Well, what we are focused on is, how can we best operate under these conditions. And we are in a place where we have got an opportunity as to increase the percentage of candidates that make it through our hiring process. So a big focus of ours in 2020. While we have JobStack in place and it's a matching engine that brings people who are not candidates, but actual employees and matches them with jobs. So that's really about utilizing the workforce. We are investing a lot of time and resources in changing the experience that our candidates have and how they come to the system to become an employee and become onboarded. And we think we have got some opportunities to make that much more seamless and then make a sizable improvement in the conversion ratio of those candidates. So in 2020, we will also be expanding our JobStack application for that to also be the process in which employees come to work for us, which we think will cut down the time significantly that it takes and make it much more seamless for the candidate and improve our conversion ratios of applicants.

How will you expand that, Derrek?

Pardon?

How will you expand that, Derrek? You said you are going to expand JobStack next year?

Yes. And so instead of going through our legacy applicant tracking system, now candidates will be applying really through the JobStack application. So it will become a more candidate-facing application and they will move through the process with some of the things that we have learned about a digital business model to make that a much more easy and seamless experience and then they will also, once they come to work for us, of course, could dispatch that way. So those are plans that we have for 2020.

Great.

When it comes to capital allocation, we don't think it's the right time to be seriously looking at acquisitions given the uncertainty that exists out there. If the horizon were to clear and there would be less uncertainty, we would change our minds on that a bit. On the other side of the coin, hopefully, it doesn't go this way. But if we were to get into more of a traditional recession and feel like we are more at the bottom and there were some deals that came along with some very opportunistic prices, we would consider that, if we could see that some uncertainty would be clearing in the near future. But outside of that, our number one place of putting our time and our resources is in this digital business model, staying really true to that. We are going to continue investing in that, whether times are good or whether times are bad. And then with excess capital that we have, we plan to put that into share repurchase. We think doing some consistently makes sense but also repurchasing opportunistically makes sense. So with less acquisitions as part of the strategy, there is more capital to put back to stock repurchase. And we authorized or announced today that our Board authorized an additional $100 million. So I think that speaks somewhat to our intentions.

Derrek, I was thinking more about the timing of that being deployed, particularly in light of the strong balance sheet?

Well, you are right. The balance sheet is in really good shape. And so we probably wouldn't want to get over are churn of debt to EBITDA in this type of environment. But given the right circumstances, you could see us flex up on that some to be opportunistic.

Okay. And then with regards to PeopleReady, can you just talk about the pacing of when you would expect the inflection to occur given the contract signings? And then one other question would be like, how should we think about the margin profile that occurred this past quarter on a sequential basis relative to the sequential increase in revenue? Was there any more repricing or is there any anything else to talk about there?

Yes, Mark, this is Patrick. In terms of the contract signing, I was referring to PeopleManagement in those earlier.

I meant PeopleManagement.

Okay. Great. Well, we are not necessarily giving guidance by quarter for 2020 right now. But when you look at the size and magnitude of the signings, I think there is a pretty good chance that in Q1 we will see a significant step-up from where what we have guided to in Q4. So I think it will be fairly early in the year that will see a pretty significant step-up from where we have been, again assuming current business conditions. I had been asked I think on an earlier call about when we thought the inflection point would happen and I had said a couple quarters ago, I thought Q4. And we did see some improvement in or we guided to improvement in Q4 versus Q3. But the deals are taking a little longer to ramp up and implement than we had originally thought. So I think we will really see that inflection in Q1 versus what we originally thought in Q4 of this year.

Great. And just as it relates to the PeopleManagement margin this past quarter, was part of that due to the efforts to sign some of these larger deals or any sort of setup fees or anything along those lines? What led to the sequential decline in the EBITDA margin in PeopleManagement?

Yes. It was mostly timing involved with less than a handful of customer accounts, some which were positive, some which were negative. But it's really just a one-quarter impact. So I think what you will see, while we have given guidance for the fourth quarter already, you will see when the results come out assuming we are within our guidance overall in the PeopleManagement. You will see a more normal year-over-year margin profile for PeopleManagement. I consider the third quarter just a few client timing issues but nothing that's sustainable as far as we can see.

And just on the guidance, two things. One would be the project work which is continuing into Q4. Would you expect that to continue into next year as well?

Mark, this is Patrick. With that particular client, we are in conversations now as we speak about doing additional project work next year as well. This is a client that's been with us for multiple years now and so the nature of the projects is lumpy. But it's a very strong relationship. It's one of our top 10 clients in terms of size right now. So I would expect that we will continue to see some lumpiness in terms of new projects in 2020.

Okay. So people shouldn't necessarily assume that that $5 million to $6 million that you are expecting to experience in Q4 should go away in Q1?

No. I would not just draw that conclusion. This is a very large client that has a lot of projects.

Great. And then the second question would be with regards to the guidance, you are excluding the cost for the restructuring, correct?

Yes. That's right, Mark. The actions that we have taken provide $2 million of savings in the fourth quarter, but we got that $2 million of costs of reserve related to some of the workforce reduction to take that part away. So that $2 million charge that I just mentioned, that will be excluded from adjusted EBITDA and adjusted net income.

Okay. And then how should we think about the tax rate for next year, just broadly speaking, assuming that WOTC goes through?

Yes. This 14% that we have been talking about this year should be about the right amount, the right rate for next year. I mean we are still putting together our estimates for that, but we have stayed within a 14% expected rate throughout this year and have stuck with that for the fourth quarter. I don't see any reason to change that at this point in time. But sometimes there are some new tax things that come up and we will wrap up that into that, but it looks pretty good for now.

Great. Thank you.

Thank you. And I will now turn the call to Patrick Beharelle for closing remarks.

Thank you. And I appreciate everyone listening to our third quarter earnings call. We look forward to talking to you again in 2020. Have a great week everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.