Q1 2020 Earnings Call
[music].
Good afternoon. My name is Adrian and I will be your conference operator today at this time I like to welcome everyone to the true <unk> first quarter 2020 earnings call. All lines are you need listen only mode. After the speaker's remarks, there will be a question and answer session. If he would like to ask a question. During this time.
Simply press Star then there number one on your telephone keypad. If you will like to withdraw your question press. The pound key. Thank you I would now like to turn the call over to Yahoos Derrek Gafford. Please go ahead Sir.
Good afternoon, everyone and thank you for joining todays call.
I'm joined by our Chief Executive Officer, Patrick Burrell.
Before we begin I want to remind everyone that today's call again slide presentation contain several forward looking statements all of which are subject to risks and uncertainties, 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 order to 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 Dot com under the Investor Relations section or 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 an audio replay will also be available soon after the call.
With that I'll turn the call over to Patrick.
Thank you Derek and welcome everyone to today's call. We appreciate you joining us this afternoon as we all navigate these unprecedented times.
First quarter results are a tale of two quarters.
Fair to our December exit rate year over year revenue trends improved in January and February with particular improvement in our largest segment peopleready.
However, those trends reversed course in March and the second have mark So I significant drop in demand associated with government and suicidal actions to address the coven 19 threat.
For the quarter for total revenue was down 11%.
And we posted a net loss of $150 million or $4.04 per share, which included a pretax non cash impairment charge of $175 million.
Many of the customers we serve have been deemed essential and we continue to support these clients.
We've seen increased demand from grocery and ecommerce retailers.
On the other hand, many of the businesses, we serve our completely shut down.
Which is significantly impacting the demand for services.
Examples include sports venues.
Motive manufacturers and nonessential retailer operations.
In total declining clients have outpaced growing clients and we expect this will be the case for sometime.
In response, we have taken decisive and significant actions that will reduce our operating expenses by approximately $100 million this year.
Sure, we're well positioned when business conditions improve we continue to invest in client and candidate facing technologies.
And our keeping our branch footprint fully intact.
Turning to our business segments people ready is a leading provider of on demand labor and skilled trades in the north American industrial staffing market.
People Reddys revenue was down 8% during the quarter, which was lower than our outlook of minus seven to minus 4%.
You did the effect of Cobot 19 late in the quarter.
People management is a provider of contingent on site industrial staffing and commercial Dragon services in the North American industrial staffing market.
Revenue was down 10% during the quarter, which was lower than our outlook of minus 5% to flat.
Also due to the effect of Kogan 19 late in the quarter.
Peoplescout is a global leader in feeling permanent positions through our recruitment process outsourcing and managed service provider offerings.
Revenue was down 21% during the quarter, which was within our outlook of minus 26 to minus 18%.
The results were adversely impacted by Koby 19, beginning in March.
Now I'd like to shift gears and talk in more detail about our operations and strategic focus in the wake of the coded 19 crisis.
The health and safety of both our employees and our clients.
Means front and center in everything we're doing right now.
We implemented comprehensive measures across our brands to keep our workers and quite healthy unsafe, including adherence to guidance from the CDC World Health organization, Osha and other key authorities.
We formed a specialized taskforce tracking the most up to date developments and safety standards as well, it's created an internal information hub with safety protocols dashboards epic Hughes and daily reporting by location uncovered 19 impact.
In addition to posting true lose action plan on our extra web sites. We are actively sharing information on how companies and workers can protect themselves.
Ongoing email social outreach webinars and other digital communications.
We are fully leveraging our jobs that gap to help companies and workers connect safely through digital environment and are testing in rolling out a new virtual onboarding capability to minimize in person branch visits.
We're also leveraging our Phoenix technology enables companies to connect with permanent Taylor through virtual hiring and sourcing.
Working closely with clients to enforce safety standards, we are supporting efforts in providing masks for associates.
In Sanitizers workplace, disinfecting, social distancing and infrared temperature checks.
We start to all of our workers to stay home, if they're not feeling well or have been exposed to cover 90.
Immediate notification itself 14 protocols are in place at the staff member and associate or clients employees is exposed to cover 19.
And our field safety specialists closely evaluate any assignments related to cleanup of potentially infectious job sites.
To ensure business continuity and support for our clients who need workers for essential services, we set up a centralized branch support center and are ready to implement regional command centers as needed to serve as backup for 600 plus branches.
Our branches follow strict sanitation and social distancing guidelines.
In addition across the Trueblue organization, we suspended all international travel unrestricted non essential domestic travel for our employees and are providing remote work capabilities for our Tacoma in Chicago support centers as well as other locations.
The progress we've made on our digital strategies are more important than ever to.
To helping us or our clients by connecting people with work.
We filled 785000 shifts the a job stack in Q1 2020, representing an all time high digital fill rate of 51%.
Our client users also hit all time high.
23500 up more than 50 per cent compared to Q1 2019.
Jobs that has the obvious advantage of allowing us to remotely dispatch workers.
Rate from home to the job site.
But it also has become a cornerstone to keep our contingent employees safe by providing routine and job specific health and safety notifications.
Throughout the current economic crisis, and especially as the world begins to emerge to lose underline mission connecting people with work is as important as ever.
As we manage through this challenging time I'd like to emphasize the following points.
First employee and client safety our top priority.
How we operate and how we relate to workers and clients matters more than ever in a world where profit principal and shared trust are inextricably linked.
We will continue to work with stakeholders to ensure the strongest safety measures for all involved.
Second through careful planning, we exited 2019 with no net debt.
Allowing us to enter this crisis from a position of considerable balance sheet strength.
Third we have taken thoughtful cost management actions to preserve liquidity, which will continue to be a top priority. This year.
For the sales and operations team have developed formal bounce back strategies to assure we are well positioned when our economy's begin their reopening efforts.
Finally, we have a deep leadership team that understands the key levers to flex the business.
Based on economic conditions.
Derek and I, both seven CFO and CEO positions, respectively. During the last recession and are surrounded by a seasoned team of operating leaders.
I'll now pass the call over to dare to will share greater detail around our financial results.
Thank you Patrick.
Total revenue for Q1, 2020 was 494 million.
Or down 11% in comparison with our outlook, a 503 to 528 million.
There are two stories in our first quarter results.
The first is the story that covers the first two months.
Revenue for January down 9%.
In February down, 6%, which was on track with our expectation.
The total company revenue trend. During these months was driven by people ready, which posted a 7% decline in January and a 3% decline in February.
With growth of 2% in the last week of February.
The second story is with the month of March during which we experienced the swiftest revenue deceleration.
And the company's history, a society sheltered itself from cobot 19 and businesses shuttered.
For March as a whole total revenue was down 16%.
For the first three weeks of March for our staffing businesses, which make up 90% of total company revenue were down approximately 6%.
During the last week of March revenue was down about 30%.
Turning to April.
Staffing revenue for the first four weeks was down 41%.
There are possible signs of stabilization with April weekly revenue results falling within a range of minus 43% to minus 38%.
But its admittedly hard to make a call on stabilization at this point.
We posted a net loss of 150 million.
Or $4.04 per share in comparison with our outlook of a loss of seven cents to zero cents.
Included in <unk> in our results is a noncash impairment charge of 175 million.
Or 152 million net of tax which translates to $4 an eight cents per share.
About 120 million of the pre tax charge was in Peoplescout.
And 55 million in people management.
Adjusted net loss per share was one cents, which is less than our outlook.
Net income per share of four to 11 cents as a result of revenue falling short of the midpoint of a revenue outlook.
Adjusted EBITDA was down 73%, primarily due to lower revenue and gross margin, which in combination with the operating leverage in our business.
Contributed to a drop in adjusted EBITDA margin of 210 basis points.
It's also important to note that the sharp decline in profitability is also due to the fact that Q1 is our seasonally lowest revenue quarter.
Consequently, the decline in revenue has a more pronounced impact on year over year profitability.
Gross margin of 25.5% was down 110 basis points.
About 100 basis points of the decline came from our Peoplescout business due to a previously disclosed client headwind.
And overall volume declines, which outpaced the timing of reductions to our recruiting staff.
Our staffing business contributed 50 basis points of headwind from a change in revenue mix associated with larger declines in our higher margin local accounts in comparison with our lower margin national accounts.
This was offset by 40 basis points up net benefit from lower Affordable Health Care Act costs.
Which we do not expect to reoccur.
Which was somewhat offset by a workers compensation benefit in Q1 2019 associated with prior insurance carriers.
That's DNA expense improved by 11 million or by 8% compare to Q1 2019.
We had an income tax benefit this quarter, a 14% as compared to our expectation of income tax expense of 12%.
Due to the pre tax loss and permanent differences associated with certain aspects of the impairment charge.
Turning to our segments.
People ready, our largest segment, representing 63% of trailing 12 month revenue.
And 8% decline in revenue and segment profit was down 33%.
March revenue was down 14%.
Revenue declined significantly during the last two weeks of March due to covert 19.
With revenues dropping 20% for the weekend at March 22nd.
32% for the weekend in March 29.
People management, representing 27% of trailing 12 month revenue and 8% segment profit.
A 10% decline in revenue.
Segment profit was down 114%.
March revenue was down 14%.
Revenue declined significantly during the last two weeks of March due to covert 19 with revenues dropping 15% for the weekend at March 20 seconds.
And 30% for the weekend at March 29.
Peoplescout, representing 10%, a trailing 12 month revenue and 25% of segment profit.
A 21% decline in revenue and segment profit was down 76%.
March revenue was down 28%.
The decline in revenue for the quarter was a carryover from the trend in Q4 2019 associated with client losses, and lower same customer volume.
As well as the impact of Cobot 19.
As previously discussed the client headwind created eight percentage points of drag on revenue.
And 25 percentage points on segment profit.
For more information on our revenue trends for the quarter as well as April.
Please refer to our earnings presentation filed today.
Now, let's turn to the balance sheet and cash flows.
We entered 2020 from a position of strength given the fact that our balance sheet had zero net debt at the end of 2019.
In March we grew substantially.
All of the remaining availability on our 300 million dollar revolving credit facility to further enhance our liquidity position.
At the end of Q1, we had 265 million of cash on the balance sheet.
And total debt of 294 million.
Our debt to capital ratio was 41%.
Or 4% on a net debt basis.
And our total debt to adjusted EBITDA multiple stood at 3.0.
Which is higher than the ratio defined by our lending agreement, which includes some different adjustments, including the add back of stock based compensation, resulting in a ratio of 2.7.
While we experienced a significant decline in adjusted EBITDA This quarter cash flow from operations increased by roughly 25% compared to Q1 last year due to the accounts receivable base deleveraging.
Which will continue to be a source of capital with future revenue declines.
We dedicated 52 million of cash towards the repurchase of common stock in February.
Well a million through open market purchases.
And 40 million through an accelerated share repurchase program or a F. R.
On February 28, we executed the MSR and 40 million of cash was provided to an investment bank.
In return 32 million of stock was delivered to the company at a price of $14, an 88 cents and these shares were removed from our outstanding share count.
But the full weighted impact will not be present until Q2.
The remaining $8 million a stock will be delivered no later than July 2nd and the total number of shares repurchase will be trued up based on the volume weighted average price over.
The four month term other agreement less a discount.
We do not plan to repurchase additional shares until market conditions improve.
Now I'd like to take a few minutes to discuss our future outlook.
Given the uncertainty of when societal and business restrictions will be lifted.
We're not able to provide a customary outlook for the next quarter with an appropriate amount of precision.
However, we are providing a robust assortment of historical and forward looking information to help investors form their own estimates.
All of which can be found in the earnings presentation file today.
I'll provide some highlights on this information starting with the topline.
Trueblue revenue has historically fluctuated along with changes in gross domestic product.
Regression analysis suggests that Trueblue revenue would be down approximately 9% of GDP was flat.
And would decline approximately seven percentage points for every additional point of year over year GDP decline.
For example, if the year over year decline for GDP was 5% for a particular quarter.
This would imply a decline in trueblue revenue of roughly 44%.
It's important to note that these are year over year GDP rates not seasonally adjusted annualized rates.
In addition to GDP.
There are a multitude of variables that can impact the demand for our services.
Consequently, we can assure you these relationships will be indicative of future results.
Also there could be additional variation in our future results as the historical company results. Using this analysis did not include periods with such Swift and significant revenue declines.
That have occurred in the current environment.
But we are using this analysis as a source of direction in our own planning and we have provided it with the hope that it is helpful.
As Patrick mentioned.
We took swift and decisive action to reduce our expected operating expenses in 2020.
Given the current environment, we chose to take significant action to quickly adjust the company to a new normal.
And reduce the risk of organizational fatigue that can in su from round after round of cost cuts.
We also attempted to be thoughtful interactions.
Not only preserve our financial strength, but also preserve our operational strength. So that we are well positioned when business conditions improve.
Based on these actions, we expect SGN eight to be about 100 million less than 2020 in comparison with 2019.
Including of workforce reduction charge of 1 million in Q1.
And about 8 million in Q2.
All in this would produce a SGN a decrease of about 20% in 2020.
Turning to fiscal year 2020 gross margin.
We expect a contraction of 180 to 120 basis points.
This gross margin headwind is associated with a mix shift in the people ready business based on an assumption that our higher margin local account business, we'll see bigger declines than the national account business.
Pricing pressure will occur in our staffing businesses.
Lower volume will occur in our people Skout business.
And the fact that a previously disclosed customer headwind at Peoplescout, well not anniversary itself until Q3.
Capital expenditures, we expect about 22 million for the full year.
Please note that our outlook is net of 8 million in Buildout costs for our Chicago headquarters that will be in reimbursed by our landlord in 2020.
Our outlook for weighted average shares outstanding for fiscal year, 2020 is 35.7 million shares.
Turning to our tax rate for the here.
We're not able to provide an effective income tax rate outlook due to uncertainty surrounding the amount a pre tax income or loss, we will incur.
However, we have provided historical components of our tax rate in the earnings release deck filed today.
As well as a Q2 outlook for the other items I have covered.
This concludes our prepared remarks.
Please open the call now for questions.
As a reminder, if you like to ask a question in press Star then a number one that is star one quick question.
First question comes from the line up here, reaching what do you know.
Hey, guys. Good afternoon, I, Oh I was wondering if you could share a little bit about.
Hi in terms of the the the trends you're seeing in April.
Maybe by sector or lines of business in terms of what.
What what's.
What's actually growing and what what stable in and what what's been declining.
Thanks.
Hi, Henry it's Derek here.
So I would I think probably the best place to go to talk about the trends is our peopleready business, which has the most breath from a geographic perspective as well as an industry perspective.
So if you take all the Industrys unifying most all of the industry's sitting somewhere between a 40% decline in a 55% decline.
Now with with that range, there's two standouts on on both sides of the range.
So on the.
More severe side anything thats hospitality related we're seeing much stronger declines there.
So for people ready that represents about 9%.
The business and with hospitality related businesses were seeing decline of about 80%.
On the other side of the spectrum the stand out on from a positive perspective is the retail industry.
That decline is about 10%.
Makes up about 7% of people Reddys business and really what's powering that is a is retail so an influx of work that's been occurring related to retail grocery stocking shelves somewhat related distribution and such.
Mhm.
Got it.
Okay and in terms of like the.
The government.
The Grand whether it's like the P.P. or.
Our PBP, sorry, or any other the stimulus programs in the cares actually I have you seen any impact on any of your client your business and.
Well.
A you know weve has such a wide variety of customers. There certainly if we stand all the way back, though we're very pleased to see what's happening with P. P. P for our people ready business since about 60% of our business, we categorized as local accounts I mean, they're not national accounts.
Which the preponderance of those are small to medium sized businesses. So.
Those actions, we're taking a that have been taken we think it really positive to help.
Clearly that business segment.
Which is something there was a arguably not enough up during the last recession.
And now another question you might have on your minds is if theres anything on that it's a benefit to trueblue and really the most the most notable thing is the deferral of a payroll taxes, specifically my gut and Medicare Ah. So those those taxes can be deferred half of it until the end of 2021.
Half of it until the end of 2022 and that would provide us with about a an additional $40 million to $50 million of cash flow benefit this year.
Got it okay.
Okay, great yet in a a hope you guys are oh stake.
Thanks for answering the question.
Thanks, Henry stay safe.
Thanks.
The next question comes from the line of Josh Vogel <unk> Corporation.
Thank you very good evening Derica, Patrick Hope you and your families are doing well.
I guess my first question outside of the PPP are there any other government programs tied to the carriers that are you you have applied or plans would apply to.
Hi, Josh Derrick here, Yeah. There were a couple that we're looking at there'll be a small amount of a benefit that we get in Canada related to the retention of some of though our workers there.
There's also a little bit of benefit that there will be coming related to any payments. We've made to employees that have been terminated so relate to the severance and we've provided some additional health care to them.
But those will be relatively small in comparison with the $40 million to $50 million of deferral that I just mentioned on the payroll taxes.
Also those items that they won't be items that will.
Have an impact we think on the adjusted EBITDA or <unk> that you all track in that we have traditionally guided to well consider those more as a onetime benefits.
Most likely so those are likely to be excluded from adjusted calculations, but certainly provide an additional bit of liquidity bump.
Okay and.
When I know, it's still early but you know when we do get back to whatever the new normal is.
I'm just curious over the past month or so have you been in negotiations with any clients that have been asking for any more concessions or contract negotiations as they try to navigate on their ends.
Well, let TEP Patrick take that one and then I'll provide a little of color in the of the guidance that we've given around gross margin for the year.
Hey, Josh Thanks for the question [noise], where we've seen most of their requests coming from clients is largely centered around payment terms.
Where a handful of our clients who come to US and said you know we'd like to extend out.
Our payment terms.
We've seen a little bit of pricing pressure in some cases, particularly on some new deals.
Partially offsetting that we're we're also seeing some new types of business that we had seen before as an example, we we just want a deal this week.
Earlier today to help a whole build ventilators.
We want to deal last week to help help a retailer did recalling out of there are there out of season retail product, it's been sitting in their energy stores and data season now.
So certainly you know the number of clients that have pulled back his his outweighed.
The number of clients that are expanding.
But we are seeing it you know some changes in how clients you're engaging us for different types of work than we've done before but to get to the heart of your question payment terms has been a big part of it and then is dared mentioned in his opening remarks, you had some mix shifts where some of our higher margin businesses have been.
Hit harder than they some of our low margin businesses say Derek you wanted to add a few comments as well.
Yeah, it's not directly what you asked Josh, but I think it's in the spirit of it as far as our expectations around gross margin, which would include this pricing piece.
So for the year, if you take a little a look at them the midpoint of the gross margin outlook that we provided for the year in the back of our earnings deck, that's about 150 basis points of compression.
About 50 of that is from pricing not because we've had any large customers coming in asking us for a concessions that's more of what we would expect to see though from new business that comes on some of that being national customers, but a good chunk of that being in our small to medium sized business.
So you've got 50 coming from pricing got about 50 coming from mix. This mix on the staffing side of the business. We are anticipating that small to medium sized businesses will have.
Figured declines then our national account business and that's more of that small to medium sized businesses more profitable for us.
And then about 50 basis points are coming from our appeal.
Part of it being from volume part of it being from a a large customer that we called out last years ahead when that would continue for a portion of this year and then also in our gross margin.
Our severance related to recruiters.
That that the cost of those salaries reported in cost of sales and so the severance will run through that line as well.
Alright, Thats really helpful. Thank you understanding that you know capital preservation is most important today, but when the economy reopens and it gets back to business as usual just curious about your appetite for acquisitions now that you know market values have been somewhat.
Reset is that something that's still a strategy.
It's not an area, where we are pursuing any specific targets right now so.
Capital Preservation is top of our list when we're not seeking to do any acquisitions at this point to the cycle.
Now as are we get further along in this cycle.
We do think that there's this recession is going to take a toll on some other staffing companies.
Particularly smaller and mid sized companies.
And we're one of the largest industrial operators in the country, but we only had about 4% of market share.
So there could be some deals that come along that our bargain in nature and if they were.
Targets that we could just integrates into our current systems, meaning very like can similar businesses, where we could get some additional operating synergies out of it we would take a look at those.
But only when we can see you know our own capital continued to hold up well be confident that things are getting ready to return.
And we could get some some sizable or synergies out of those deals.
Okay, Great and yeah. Thank you for all the information in a that the page 12 of this slide presentations really helpful. Just for directional commentary. So when we when we do look at the cost savings on its on the Ash DNA line and you think it'll be a you said it was about <unk>, you think a 100 million.
Lower year over year in 2019 does that include that 8 million employee termination charge in Q2.
Yeah, that's right. So it's that the 100 million approximation that that's a that's net of any of the.
Workforce reduction reserves that we've taken which are you know, it's largely a severance and and health care benefits we've.
You've offered some additional benefits to folks that we've had to terminate given the circumstances of the job market in the economy.
So that's in that number.
Okay, great well. Thank you for taking my question stay safe guys.
Thanks, Josh.
Again, if you will like to ask a question, let's start there number one that is star one for questions. Your next question comes from the line of John Healy with Northcoast research.
I think you.
I guess I wanted to ask a little bit about the year over year GDP growth that you guys highlighted in the implied growth. The company can you maybe just walk through.
Oh, you feel today's business might compare to those statistics and the reason I asked that is just because I'm sure. This is kind of been revenue performance in the past. So I'm just trying to think about maybe some puts and takes in terms of what to expect versus kind of that regression analysis and then is that.
The.
The traditional staffing business only or kind of the some of these solutions businesses and things like that also factored in there.
Hi, John Thanks. Thanks for the question. So that is that's trueblue all in numbers over the last 10 years by quarter.
So that's what we've taken and what we have then the correlation analysis against with quarterly GDP.
Ah statistics.
So that does include anything that we've acquired it includes our people management and Peoplescout business as well. So that's an all in the company statistic.
Over the last 10 years.
Got you know that makes sense and then just wanted to ask just about end market exposure a little bit you guys called out the sports leagues. It was kind of thinking about sports concert conventions trade shows those types of businesses is there a way to think about the magnitude that that represents of revenues and.
Any sort of visibility you have there or at least how you're planning that business potentially for for potential restart.
Yeah, so as a percentage of revenue.
That a that business.
And our people ready business runs about a 9%.
Let me, let me get to that for the all in company number here.
So all in company the hospitality for us runs about a 7% to 8%.
So anything that's that sports venue related anything that's a hotel related banquet were related all fits into that business. So.
You know our business as you know John the the visibility is very low yeah. When it comes to how you know the hospitality industry and travel industry is going to bounce back well, that's just something that we're not sure. All so we're setting our expectation is relatively low there you know as discussed with a a question that came earlier here today.
Right around that are part of our business. It's yeah. It was down 80% in April.
So we're just going to continue to have cut low expectations on that portion of the business.
Until we see thing how things play out here for awhile.
Sure.
Makes sense and then just on the $100 million of cost savings was just trying to think about how much of that is reduction efforts.
And how much of that is yes, you in a fall off associated with the lower revenue. So how much should we think about kind of structural cost savings versus cost savings that will come back when revenues are clip when when revenues start to reaccelerate, how should we think about kind of some of the the bucketing.
[music].
Yeah.
Thanks for the question so I'll be I've tried to be really careful in this explanation just to help ensure that nothing gets under misunderstood because and instruct us or it's a sense all of those costs are variable since we use since we cut them, but I think really the spirit of your conversation as <unk> as well how much was that a a managed cost reduction and.
How much just comes off.
Because of the way the businesses built with incentive programs and such where those cost just fall out of the piano kind of on their own without a lot of management oversight.
So the 100 million I'd say about a quarter of that is just really strict variable cost that just kind of flex up and down based off of volume most of those items are around certain incentive programs, particularly our people ready business.
At around sales commissions and the bonuses related to our branches.
The other 75% is a really are those are those are all costs that have been actively managed.
Down.
Yeah. The second part of your question is well how will those things come back how much will come back.
And you know, we'll just have to see.
You know there are some things in those cost that we've managed down like pay cuts.
We're not giving raises.
We've cut the the match contribution toward deferred comp and for one k. programs. Those those are things that will need to come back in time.
Oh, there's also though a lot that is personnel related.
We are running even some of our people ready branches less than our previous minimum of three.
Ah job stack is that helped enable that.
So I think when would it all shakes out I think theres an opportunity for some of these cost that we've taken out to potentially stay out of the business. One because this current environment has certainly opened up our mines in the mines of of many others on a challenging some assumptions that we take in how business should be around it.
Creating some new thought leadership about how we go about running the business and certainly we're gonna continue investing in technology, which could also help reduce some of those cost. So I think we'll just need to kind of see how things play out this year, John to get a better sense of that but that's how we're thinking about it.
Great. Thank you guys and I hope you say about there.
Yes, Thanks on Hey, John This is Patrick I, just wanted to add a couple of points a color.
To some of the comments that there is rite aid I think well this.
Worth emphasizing that [noise].
You know characterizing nature of the cost cuts one other things we didn't do.
Is [noise] go on a big branch closing exercise you have you if you look back to the last recession, but.
A big part of our.
Cost cutting efforts were to close branches and one of the learnings we had from that is once we close the branch it was very hard to reopen and become profitable.
And so we ended up losing the preponderance of the that revenue when we had close to branch and never really got it back.
And so this time as we were thinking about.
What cost cuts, we would make we were keeping a very close eye on making sure we positioned ourselves to have a strong bounce back.
To take advantage of.
You know an increase in demand and so we did we didn't close any branches as part of this effort.
And you know we've worked with the sales and marketing teams put together formal programs around.
Targeting those opportunities as they are likely to be quite large coming out of this is an example, a lot of the retailers and restaurants and other.
Businesses that are engage consumers.
In their facilities, they're gonna have to reconfigure those stores.
Where there was restaurants to have more social distance, you're going to need people to help them do that.
That deal I mentioned earlier that we had one around merchandise having to be moved because it's out of season and so there's a a pretty large recall opportunity in a in the retail space for how to season.
Product.
We're tracking our competitors very closely and looking for branch closings, whether it's a local small mom and pop provider or our large national and they really going to target their client base.
We're where others are closing branches and so I think it's important to note a big part of our strategy was to go close a bunch of branches to save money. In fact, we think there's an opportunity with some of the things I just mentioned had a pretty strong bounce back.
Great. Thank you got.
Again, if you like to ask a question press Star then number one that is still one for questions and next question comes from the line of Kevin make me with credit Suisse.
Great. Thanks, Hey, I'm very very helpful disclosures.
We see and you know pretty uncertain times.
Peter I Wonder can you just remind us in addition depended hospitality, 70% of revenue just broad mix across the other end markets that you're certainly today.
Oh.
Yeah are you looking are you asking for like our mix of business.
Okay Yeah.
Yes, and then just if you could tie into that maybe.
What the current kinda national account versus local account makes it looks like as well.
Just brought known Beth.
Yeah, So lets hit the so what we're talking about right now is our people ready business on national versus local so we run about 60% of our business. There is on the local side and about 40% of that is on the national side.
10 points of those 40 that I have put in there is renewable energy and industrial plant shutdowns or not all of them are technically national types of customers, but they do tend to be larger projects. So I throw it into the into that category for purposes of this discussion.
And if we if we go down and talk about our mix of business.
So this is all in for the company.
We have our energy renewable energy and industrial business, which is kinda construction related at 7%.
Ah Ah our construction, excluding that energy and industrial business is 13%.
Manufacturing 25.
Transportation 20.
[noise] retail.
[noise] 12.
[noise] General services Tim.
Hospitality eight.
And the infamous other category at six.
It's Super helpful. And then you know art.
You know decide on the selected outlook really helpful.
Okay. So clear on that or you tend to leaning towards one way or the other income to your GDP estimates.
If you're thinking about kind of Q2, and then over the balance of the year.
I'm, sorry, you cut out right there to him Kevin could you ask that last.
Uh huh.
You know the year on year growth, you've got a lot of sensitivity would be helpful, where do you mean in kind of one way or the other you know based on what that looks at hundred million to call. It seems based on what type of GDP declined.
Yeah.
So when we're at when we're talking about the revenue outlook.
We're using a basket of of GDP different GDP estimates, that's basically a year over year GDB Cline GDP decline of 4%.
Now when we take that basket and we look at it by quarter.
At least here for the second quarter, what that would suggest our our trends are trending below what that would suggest.
However, we've planned our business with these cost cuts and other moves.
Around a higher decline than what those that GDP would suggest.
Now, we'll see that might change as we move either through the quarter or we get into the.
The back half of the year, but 4% is generally how do let decline is how we plan to business.
Okay, and then one last one if I could.
Are there any kinda areas need Washington state or anything like that where you're starting to see some recovery in or is there anything you'd call out from kind of the behavior perspective amongst your clients.
Well, let Patrick pick that one.
Great Hey, Patrick.
Hey, I think it I think it's too early to tell at this point there's been.
I mentioned earlier, a few wins it [noise].
Happened from an industry perspective.
You know, we've seen a subset of our retailers.
From an auto perspective, you know a lot of the auto suppliers that we support shut down in.
In late March and they're coming back in a couple of weeks a several of them that are reopening.
So.
From an industry perspective, it's all over the place from a geographic perspective I just think it's too early to tell at this point the the reopening efforts in Georgia and a few other places there was a few signs of of life that weren't there.
You know a couple of weeks earlier.
In terms of of volume coming through but headline is I think it's too early to draw any big conclusions.
Thank you very much.
Again, if you will like to ask a question you Press Star then it number one that he start one for questions.
We have a question from the line I enjoy to reduce with Baird.
Hey, guys. This is a under children's calling in for Mark Mark on I was just wondering if you could potentially provide some color on what's happening to collections on receivables.
And they still are dsos, specifically from like smaller clients and what what you're seeing what the smaller clients ability to pay.
Sure Yeah. Thanks for that question.
Well I think it's too soon to tell so far you know if we just take a look at where Q1 was our days sales outstanding was down one day.
So I think there's risk that that could or could extend itself.
Certainly during this recession, that's a week we saw during the last recession now that said we've taken a very aggressive stance on this you know when it comes to managing our receivables.
We have about 25 pocket meetings every month.
We have implemented a very robust.
Dashboard and reporting system that that unifies all of our accounts receivable into a database that's used for a variety of different metrics. We were working on that last year. The on it just couldn't have come at a better timed and right now.
We also changed a lot of our incentive programs are our peopleready branches. They get charge interest are now on their accounts receivable. So when it comes to our local accounts. They are a incentive <unk> one because their bonuses are based on the performance of that branch, but also as though the receivable balance gets bigger or more age or they're charged a.
An interest rate on that we've also made changes to somewhere a compensation programs. When it comes to sales folks that the bad debt will also calorie count in the calculation.
So I think where we stand today as we take a look at managing.
Receivable portfolio during recession, I think the companies in the best position, it's ever been as far as it strategies and how to approach that that said this is a recession and people will pay slower. So we haven't seen any signs of that deteriorating yet, but I think we're just going to need to see how that plays out and it'll continue to be a risk I think until things.
Hard to turn.
Oh, Thank you very much so that's very helpful and obviously.
It's pretty evident that demand is diminishing but have you seen anything on supply side of labor.
I'll, let Patrick pick that one.
Yeah, Andre well, it's a it's a mixed story as.
As you might imagine a 30 million.
Unemployed people are five people filing for unemployment or there's a lot of folks that are.
They were looking for work.
On the other hand.
The.
The programs that have put in place to help you out employed in some cases.
Folks can stay home and make more.
Then they would pursuing some of our our lower end.
Job opportunities and so a little bit of a mix certainly net net you know there was a supply demand imbalance prior to co bid, where there just wasn't enough supply and a lot of demand a I'd say, it's the other situation now where there's certainly more supply.
And.
And then there is demand right now.
[noise] Yeah, no I'm not that's that's perfectly kind of teed up next question I was talking a about pared back end up obviously, the additional unemployment benefits ever given to each state. How are you guys really you kind of touching about how are you guys really thinking about that going forward as demand normalizes are you expecting that with some of the more minimal wage and part.
Time work that you're going to see an impact negative impact of people not wanting to return to work because of the additional benefits.
Well I don't think there's much of a risk for full time staff, but for our for contingent workers certainly there's we've seen some of that are ready.
But I think it's also fair to say that there's more than enough supply at this point, we're not having to.
A situation where jobs are going and still because we don't have enough workers, which was the case.
Before kovats I don't I don't think that's a particularly high concerned at a macro level certainly individual people are making decisions.
Two to stay home because they dig in some cases make more money that way, but from a macro perspective, and you know our overall business I I don't think that's gonna be a headwind for us.
Alright sounds good thank you very much.
Again, if you like to ask a question press Star then you're never one that is start showing some question.
And then answer the questions I will turn over to Petromin rail.
Thank you operator, I'd like to just take a moment to say how incredibly proud I am a true blues employees and our associates, a as to how they've risen to the challenge.
So admirably during a pandemic.
They've just done a great job and I couldn't be prouder I. Appreciate you all are listening to our first quarter earnings call. We look forward to chat and again next quarter.
Have a great week, everyone and please be sure to Stacey Thank you.
This concludes today's Trueblue first quarter 2020.
Earnings call you may now disconnect.
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