Greetings and welcome to the TrueBlue First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I want to remind everyone that today's call and slide presentation contain forward-looking statements, all of which are subject to risks and uncertainties and management assumes no obligations to update or revise any forward-looking statements. These risks and uncertainties, some of which are described in today's press release and SEC filings, could cause actual results to differ materially from those in the forward-looking statements. Management uses non-GAAP measures when presenting financial results. You are encouraged 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, a copy of the company's prepared remarks will be provided on True Blue's investor website at the conclusion of today's call, and a full transcript and audio replay will be available soon after the call. It is now my pleasure to turn the call over to Taryn Owen, President and Chief Executive Officer.

Thank you, Operator, and welcome everyone to today's call. I am joined by our Chief Financial Officer, Carl Schweihs. As expected, the subdued market demand we discussed on our last call continued in the first quarter. Revenue for the quarter was $370 million and near the high end of our outlook range due to encouraging trends in our on-demand and on-site staffing businesses. I am incredibly proud of the resilience and dedication shown by the TrueBlue team as we help our customers navigate an increasingly complex and unpredictable business landscape, all while persistently controlling costs. Evolving governmental policies have hindered business confidence and thereby continue to suppress the staffing industry. Despite these challenges, we remain diligent in driving value for our customers with innovative and flexible workforce solutions. For example, our onsite business recently secured a new engagement with a global logistics company, helping them to drive enhanced efficiencies and replacing over 35 vendors across the client's network. Another example comes from our people ready on-demand business where a large national retail customer needed increased support as they worked through large-scale store liquidations and our team was there tapping into our extensive branch network to quickly address the heightened demand. Our depth of expertise enables us to understand the unique challenges our clients face and we continue to support them every step of the way. As we leverage our inherent strengths and comprehensive service offerings to meet the needs of the market today, we are also paving the path forward with our strategic priorities to capture market share and enhance our long-term profitability. We are expanding our presence in high growth and under-penetrated end markets as well as high value roles to capitalize on secular growth opportunities. We have additional opportunity to drive revenue expansion in the healthcare space thanks…

Thank you, Taryn. Total revenue for the quarter was $370 million, a decline of 8%, and at the high end of our outlook range. Included in these results is 3 percentage points of growth driven by our recent acquisition of HSP. As expected, overall market demand remains soft as uncertainty and client caution continue to weigh on the staffing industry. While these factors led to subdued volumes across most verticals, our teams are doing a fantastic job capitalizing on growing markets and creating opportunities for additional growth. For example, our onsite team outperformed the prior year in new business wins this quarter, and our commercial driver business delivered double-digit growth for the third consecutive quarter. Gross margin was 23.3% for the quarter, down 140 basis points. Lower workers' compensation costs driven by favorable development of prior year reserves contributed 130 basis points of expansion. This was offset by changes in revenue mix, with more favorable trends in our lower margin businesses contributing 210 basis points of decline. Pricing pressures consistent with current market conditions drove another 30 basis points of decline, and certain software depreciation now being reported in cost of services contributed 30 basis points. Keep in mind, software depreciation is non-cash and excluded from our EBITDA and adjusted EBITDA calculations. We successfully reduced SG&A by 12%, outpacing our revenue decline as we remain disciplined and committed to enhancing our profitability. We have made significant progress creating greater flexibility to scale, so while our profitability traditionally expands quickly as revenue grows, our lean cost structure and improved efficiencies mean that we're even better positioned to deliver enhanced profitability as industry demand rebounds. We reported a net loss of $14 million this quarter, which included a small amount of income tax expense primarily associated with our foreign operations and essentially…

Thank you, Carl. As you have heard from us today, we remain dedicated to helping businesses adapt as market conditions continue to evolve, and we are committed to growing our business, controlling costs to improve profitability, and advancing our strategic priorities. We are confident that we have the right people, technology, and resources to drive TrueBlue forward and capitalize on the growth opportunities ahead, 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 Instructions] Our first question is from Kartik Mehta with Northcoast Research.

Hey, good afternoon, Taryn and Carl. I wanted to ask you just about how each month looked in the quarter. Did you see a difference as maybe businesses felt some more uncertainty, or was a quarter fairly -- or was each month of the quarter kind of fairly in line?

Hi, Kartik. Thank you for the question. You know, in a challenging environment, PeopleManagement did return to growth in quarter one and continued their success in the new deals with annualized wins over $30 million -- $35 million for the quarter that we discussed last quarter. And the momentum in PeopleManagement has continued as we exited Q1 into April. We are also encouraged by some positive trends that we're seeing within PeopleReady, both in quarter one and into April, as we continue to focus on driving growth by taking market share in the current environment. And one significant way that we're doing this is by aligning our PeopleReady on-demand organization into territories and adding sales reps across the country to implement those targeted sales strategies in each territory.

Yes, and just to add onto that, Kartik, is we've also seen some positive trends in the revenue growth by state. So we're seeing more geographies growing than we have in previous quarters, with more than about a third of our states returning to growth in March. This trend improved as we progressed throughout the quarter and continued into April. I know you also had just kind of a question on the monthlies and kind of how they went. Our PeopleReady business exited the quarter in March at minus 8%, and PeopleManagement exited the quarter in March at plus 4%. And then April trends, really similar to kind of how we've exited the quarter, which is pretty positive news given kind of the uncertainty from all the tariff news.

Yes, definitely. I think, Taryn, you talked about some field sales reps, especially for the PeopleReady business that came in in the first quarter. I know maybe this is too early, but I'm curious if there's any signs of how they're doing, maybe any green shoots in that strategy?

Yes, thank you for the question. The first wave of the new PeopleReady field sales reps joined in quarter one, and we are on track to have expanded our sales team by 50% by the end of Q2, which will bring our total number of sales reps in the field to approximately 165. We do continue to see those sales-enabled territories performing better than the rest of the PeopleReady on-demand business, and I'll let Carl give more specifics on those growth trends.

Yes, thanks, Taryn. Yes, so, Kartik, just those sales-enabled territories, they did outperform kind of the rest of the business by several points in Q1, and that trend continued in April where the territories exceeded the comp group, and that spread actually expanded. So we're feeling good about our focus on this.

And then just one last question. Just on HSP [ph], the performance of the first quarter, how it compared to your expectations, and if there's been any change in fundamentals in that business this quarter?

Yes, no, thanks for the question, Kartik. Again, yes, financial results for HSP in Q1 were largely in line with our expectation as well as our guide for Q2. So, feeling good about that. Still early days with them, but yeah, right in line with where we had, and the margin profile there was kind of in the mid-single digits where we expected for the first quarter as well.

Perfect. Thank you very much. I appreciate it.

Thanks, Kartik.

[Operator Instructions] Our next question is from Mark Marcon with Baird.

Good afternoon. On HSP, what sort of growth rate did they achieve during the quarter, and what are you kind of projecting as it relates to -- you said the 5 percent, but I'm wondering what the organic growth rate is for them if they achieve that 5% of revenue.

Yes, the 5% percent, I'm a little -- I don't know about that one, but -- so, they delivered about $11 million in the quarter for there. And so, just as we've talked about, kind of, HSPs historically outperform the market, both in periods of kind of growth and decline, and we expect for that to continue in this current environment. One thing I will just call out, Mark, is that, as a reminder, kind of, due to the nature of HSP having mostly state and local government clients, their year ends are June 30th. So, our Q1 results, roughly flat in relation to the revenue results and trends that we saw in Q3 of '24, and that's really how we've been modeling the business.

So, for this quarter coming up, you're basically expecting flat year-over-year revenue growth?

It was flat to kind of Q3, and then our expectations, kind of, as it builds are, you know, right in line with our Q2 results -- our Q1 results.

And Q1 was flat, or did they -- what was their organic growth rate in Q1?

The organic growth rate was similar. So, we didn't own them, obviously. We owned them as of January. What I was talking about is the HSP business has a kind of year start as of Q3. So, Q3 of '24 was flat. So, Q1 of '21 results were flat to Q3 of '24, and that's how we've modeled the business and talked about it so far.

Okay. Great. And can you also talk a little bit about their margin profile in terms of gross margins? I'm just trying to -- I'm looking at the, you know, the Q2 guide in terms of gross margins and just trying to see what is factoring into that.

Yes. Gross margins kind of right around PeopleManagement margins from a gross perspective, and then our expectations for EBITDA margins are kind of high single-digit EBITDA margins for Q2.

Okay. And so, the gross -- is part of the reason for the 220 to 180 basis point decline year over year in terms of gross margins the contribution from -- the mixed contribution from HSP?

That's absolutely right.

Okay. Great. And then just, you know, Kartik asked this question, but just are you -- what are you hearing from, you know, from companies that you're dealing with? Obviously, Liberation Day was April 2nd, and so I'm wondering, you know, post that have you seen any sort of change with regards to the cadence in terms of business wins, pauses, things of that nature? And then in general, whether it's both for PeopleReady, PeopleScout, and PeopleManagement. And then also, are you seeing any sort of differences from an industry or vertical perspective?

Yes. Thank you for the question, Mark. I would just say that the uncertainty and caution continues with our customer kind of -- customers kind of pre- and post-Liberation Day. The uncertainty is certainly weighing on them, and it is creating some reduced hiring volumes and smaller scope deals as businesses and our customers are navigating this uncertain environment, I would say. From a pause perspective, we're seeing more of that in our PeopleScout business where customers are instituting hiring freezes or slowing down their hiring as they kind of wait this out and determine what their workforce needs will be. But I would just say that the uncertainty has continued.

And then, Mark, I think there were a couple of questions in there, so I'll try to -- I think I said earlier just April trends have been really similar to how we've exited the quarter, at least from a results standpoint, in the first, you know, four weeks of April that we have. And that was, obviously, you know, post that news. You also kind of asked just about anything else geography-wise. I'd say, you know, trends…

Or industry vertical-wise.

Or industry vertical. Yes, the biggest improvement that we saw were really in kind of transportation, retail, and professional services from an end market perspective in Q1. The improvement in transportation was really driven by our centerline business, but also other brands saw improvement as they have some clients in this vertical that are less cyclical. We continue to see softness in, you know, as we said in prepared remarks, manufacturing, some in construction, and hospitality as well.

Thank you. Very helpful.

Our next question is from Jeff Silber with BMO Capital Markets.

Hey, this is Ryan on for Jeff. I know a lot of the tariff stuff is still up in the air, but are there any benefits you're seeing or might expect to see from reshoring American manufacturing? And then on a prior call, you called out heightened activity on the southern border. I was wondering if you have any updates there.

Yes, thank you for the question. We're carefully monitoring the news and assessing the potential indirect impacts that tariffs will have. But tariffs could certainly lead to more onshore manufacturing, which would be a tailwind for our business. And so we certainly have customers preparing for that. On the immigration side, many customers and prospects are increasingly looking to TrueBlue to ensure that they have a workforce that's authorized to work in the United States. In our staffing business, customers across multiple industries are increasingly performing internal audits to ensure that their workforce complies with current regulations. On the question regarding the southern border states, we did see positive trends in those southern border states continue through the quarter, specifically in Texas, Arizona, and Nevada.

Thank you very much. And then just for the follow-up, I was wondering if you could break down the revenue guidance between your three segments?

Yes, absolutely. Thanks for the question. So I'll just, in total, write minus 1% to 5% growth, which is a midpoint of 2%. And just a reminder, that includes five-point impact due to the acquisition of HSP. I'm going to just hit the midpoints for the rest of the segments. The midpoint for PeopleReady is minus 3%. The midpoint for PeopleManagement is plus 3%. The midpoint for PeopleSolutions is plus 29%. If you exclude HSP from that, that would have PeopleSolutions on an organic basis at minus 17%. And then just another reminder is just, look, the hospitality client loss we discussed in previous quarters creates about a point of headwind for TrueBlue and 10 points for PeopleSolutions, and we'll lapse those comps as we execute too.

Thank you very much.

Of course. Thanks for the questions.

Our next question is from Marc Riddick with Sidoti.

Hey, good evening.

Hey, Marc.

So I was wondering if you'd talk a little bit about what you're seeing as far as flow of potential candidates. I mean, are we seeing -- have the headlines or the economic sways have much in the way of, are you seeing any changes in candidate availability? And if so, are there any particular areas where that may have picked up and I guess maybe vice versa, potentially gone the other way?

Yes. So Mark, at least from a fill perspective, we're continuing to see expansions in our fill rates. So not having trouble fill the orders that we have. We've seen our fill rates getting the 90% in Q1 here. So continue to be able to fill the orders that we're getting.

And can you talk a little bit about the -- is there much in the way of year-over-year pricing change that's not necessarily revenue mixed, but as far as just general pricing trend-wise, how we should be thinking about, are there any areas that are specifically challenges or any particular areas where you're seeing any meaningful pushback there?

Yes. Thanks for the question, Marc. We're seeing this type of pricing pressure we would expect in this type of environment as our clients certainly remain cost-conscious. But overall, we've maintained our pricing discipline and continue to look for ways to drive enhanced efficiencies to offset that.

Okay, great. And then maybe could you share a little bit as far as the, as JobStack continues to be a bigger piece and maybe what you're seeing there as far as those benefits, are there any particular areas that are specifically helpful as far as market share gains? And is that along, and as a tangent from that, is that along the lines of your expectations or better or worse? How should we think about that?

Yes, thanks for the question. As you know, having our own proprietary version of JobStack allows us to control our roadmap and quickly ensure that we're meeting the needs of our customers and our associates. And so our roadmap is delivering as expected. One thing that I'll call out is that our App Store rating continues to outperform competition in this space. And feedback indicates from those ratings that our users are highly appreciative of the app's convenience, ease of use, and its ability to really quickly help them find work. And they're also highlighting that they value the flexibility to choose work based on their schedule. A number of enhancements have been made in the tool. One is our ReadyMatch technology, which helps instantly match job requirements with a pool of qualified workers and makes it easy to invite the best fit workers to the job. Our digital onboarding experience is working as we would expect where associates are able to onboard in as little as 30 minutes and immediately begin self-dispatching to available jobs. So I would say working as expected.

Sounds encouraging. Thank you very much.

Thank you, Marc.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Taryn Owen for any closing comments.

Thank you, Operator, and thank you, everyone, for joining us today. I also want to take this opportunity to thank the entire TrueBlue team for their tremendous efforts providing our customers and associates with exceptional service and their commitment to advancing our mission to connect people and work. We look forward to speaking with all of you at upcoming investor events and on our next quarterly call. If you have any questions, please don't hesitate to reach out. Have a great evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.