Q2 2021 TrueBlue Inc Earnings Call
Carried into the second quarter.
Second quarter revenue was $516 million, an increase of 44% compared to the second quarter of the prior year growth.
<unk> was driven by both new client wins and higher existing client volumes as we capitalize on strong demand in the markets and industries we serve.
We delivered net income of $16 million in the second quarter versus a loss of $8 million in the second quarter of the prior year.
And adjusted EBITDA was up $30 million year over year with the related margin of 640 basis points.
Before turning to our segment results I want to highlight 3 performance areas.
As as they relate to our second quarter results and some thoughts regarding the worker supply going forward.
First we are excited our people management and people scout segments have nearly recovering to their pre pandemic revenue for the second quarter.
And people management revenue was down just 1%.
Since Q2.2019 supported by a doubling of new client wins through June versus this time last year.
Revenue per people, Scott was down only 2% versus Q2.2019, as the travel and leisure segment rebounded strongly growing over 200% during the quarter.
Revenue.
For people ready was down 19% versus Q2.2019.
People ready has not rebounded as quickly as the other segments.
The worker supply shortage hits this segment harder each of the short notice period, we received from customers to deliver contingent workers.
In addition, the federal unemployment benefits provide more competition.
Prediction than typical low wage on demand jobs.
We are seeing both dynamics in certain industries, such as commercial construction, which is 12% of our mix and has only recovered 60 per cent of Q2.2019 revenue.
Secondly segment profit margins are improving across all.
All segments.
In our staffing segments favorable workers' compensation trends combined with improving bill pay rate spreads were the primary drivers of the margin expansion.
And people scout higher volumes and utilization of our recruiting staff are leading to improved operating leverage.
Now I'd like.
Settlement to touch on the worker supply.
Many companies across the United States, we are experiencing some pressure on worker supply people ready and people management.
To proactively address this situation both segments have launched programs to retain existing associates reengage former associates and source.
New candidates.
For our current associates, we started to provide attendance bonuses and rewards to our top performers.
To Reengage, we launched the campaign and states eliminating the federal unemployment programs targeting those who have not worked over the last 18 months.
Finally, we are running a job.
Job stack referral program to attract new workers.
For our full time employees were providing incentives to our recruiting team for putting people to work.
We expect worker supply to gradually improve during the third quarter as broader federal unemployment program ends for all states and schools reopen.
However, we are monitoring the impact.
The latest stimulus payments to started on July 15th focus on providing support for families with children, which could prolong the challenges.
Now, let's turn to our results by segment, starting with people ready.
People are ready with our largest segment, representing 58% of trailing 12 month revenue and 64% of segment profit.
Profit people ready as the leading provider of on demand labor and skilled trades in the North American industrial staffing market.
We service our clients via a national footprint of physical branch locations as well as our job stack mobile app.
People ready revenue was up 43% during the quarter versus down 13% in Q1.
People management is our second largest segment, representing 32% of trailing 12 month revenue and 16% from segment profit.
People management provides onsite industrial staffing and commercial driving services in the North American industrial staffing market.
The essence of a typical people management engagement supplying an outsourced workforce.
That involves a multiyear multimillion dollar onsite our driver relationships.
Management revenue is reaching pre pandemic levels with year over year growth of 28% in the second quarter versus growth of 7% in Q1.
Turning to our third segment people scout represents 10%.
<unk>, a trailing 12 month revenue and 20% per segment profit people scout as a global leader in filling permanent positions through our recruitment process outsourcing and managed service provider offerings people. Scott revenue is also nearing pre <unk> levels with year over year growth of 106% in the second quarter versus.
A decline of 13% in Q1.
We are very excited about the accelerated pace of the recovery.
Now I'd like to shift gears and update you on our key strategies by segment, starting with people ready.
Our most important strategy people ready to further digitalize, our business model to gain market share.
<unk> and improve the efficiency of our service delivery cost structure.
Most of our competitors in this segment are smaller mom and Pops.
I don't have the scale or capital to deploy something like our job stack mobile app. So this along with our nationwide footprint is what makes us a leading provider within industrial staffing.
Since rolling out jobs back to our associates in 2017, and our clients in 2018 digital fill rates have increased 3 acts to nearly 60%.
With 788 out of these shifts filled via the app during the quarter, our jobs that client user count ended the quarter at 27100 up.
Per cent versus Q2.2020.
Driving heavy client user growth continues to be a key focus heavy client user has 50 or more touches on jobs that per month, whether it's Henry in order.
Rating, a worker or proving time.
Jumps back heavy client users continued to post.
Up 20 year over year revenue growth rates compared to the rest of the customer base.
The Q2.2021 growth differential exceeding 40 percentage points on a same customer basis.
This growth differential is largely driven by wallet share takeaways from competitors heavy client users tell us a major reason they are moving share to people ready.
It was better due to job stacks unique capabilities.
Heavy client users are becoming more material in our overall results.
They now account for 46% of people ready use on demand revenue compared to 30% in Q2.2020.
With the foundation of our digital strategy in place.
We've expanded our focus on how to better serve existing clients and reach new ones.
Combining the strength of our geographic footprint jobs that technology, and repurpose job roles people ready is well positioned to more effectively and efficiently serve clients.
At the end of the first quarter, we launched to market pilot.
Place that utilize semi service centers responsible for recruiting onboarding and local delivery.
The service centers increase our accessibility as they operate 85 hours per week versus 60 hours for a typical branch.
This enhanced go to market approach includes repurpose.
Purpose job roles with the creation of dedicated account managers, who are responsible for growing and building client relationships.
We believe we'll be able to use the cost savings from reducing non client facing roles to more than offset the cost increases from adding more client facing roles such as account managers.
This fundamental shift in how we deliver our services requires thorough training and change management for our employees.
While it is still early we are gathering key learnings that will improve our operating model leading to higher digital fill rates increased productivity and higher customer satisfaction will continue.
To provide updates as.
This was progress.
Turning to people management, our strategy is to focus on execution and grow our client base.
Last year, we sharpened our vertical focus to target essential manufacturers and warehouse and distribution clients and made investments in our sales teams to enhance productivity.
With these initiatives implemented.
The pilot broaden the strategy to expand our geographic footprint by targeting more local in underserved markets.
We're seeing strong results as people management secured $63 million of annualized new business wins, so far this year.
Share to $32 million this time last year.
Finally, we are investing in customer.
We will see a care programs in an effort to better serve our clients' needs and improve retention.
Turning to people scout the strategy Leverages, our strong brand reputation to capture opportunities in industry poised for growth.
Covid struck we along with our competitors experienced a trend towards more in sourcing.
With some clients, bringing more recruitment functions in house.
Many of the in house teams were reduced or eliminated during the pandemic and we're seeing companies return to hybrid and fully outsource models to.
While we have made investments in our sales team.
We believe there is a big opportunity to increase wallet share at <unk>.
Amazon clients and diversify the industry mix within our portfolio by adding new clients. These.
These efforts are already delivering results as shown by the $33 million of annualized new wins secured by people Scott So far this year versus $9 million. This time last year.
I'll now pass the call over to Derek who will.
Share greater detail around our financial results.
Thank you Patrick.
Total revenue for Q2, 2021 was $516 million reps.
Representing growth of 44% driven by new business wins and higher existing client volumes.
We posted net income of 16.
Or <unk> 45 per share an increase of $24 million compared to a net loss of $8 million in the prior year.
Revenue growth gross margin expansion cost management and operating leverage contributed to the net income growth.
Adjusted net income was $16 million or an increase of 21.
Which is less than the increase in GAAP net income primarily due to $11 million of workforce reduction charges. In Q2.2020 that are excluded from adjusted net income.
We delivered adjusted EBITDA of $25 million.
An increase of $30 million.
And adjusted EBITDA.
Margin was up 640 basis points.
Driven by the same items previously mentioned for net income.
Gross margin of 26, 4% was up 320 basis points.
Our staffing segments contributed 70 basis points of margin expansion aided by lower workers' compensation costs.
EBITDA due to favorable development of prior year reserves.
Gross margin also benefited from bill rate inflation that exceeded pay rate inflation, but was offset by increased sales mix from our energy and industrial business, which has a lower gross margin due to the pass through of transportation and per diem costs.
Depot Scout contributed 250 basis points of expansion with 170 basis points associated with operating leverage from higher volumes.
The remaining 80 basis points was due to non repeating workforce reduction costs incurred in Q2.2020.
Which are excluded from our adjusted net income and adjusted.
Our calculations.
Turning to SG&A expense, we delivered another quarter of favorable results.
G&A was up 14%, but as a percentage of revenue was down 570 basis points.
Excluding the work force reduction charge in Q2 last year SG&A was up 24%.
EBIT, which was roughly half the rate of revenue growth.
And was down 340 basis points as a percentage of revenue.
We continue to balance cost discipline with preserving our operational strengths to ensure we are well positioned for continued growth.
We're also piloting opportunities to further reduce the cost of our people ready branch network.
Better use of technology centralizing, a work activities and repurposing job roles, while maintaining the strength of our geographic footprint.
These pilots will occur throughout 2021, and if successful could lead to additional efficiencies in 2022.
Our effective income tax rate was.
Through <unk> percent in Q2.
Turning to our segments people ready revenue increased 43% with segment profit margin up 590 basis points.
Trends improved across most geographies and industries.
Year over year revenue in our 3 largest verticals construction transportation.
19 manufacturing improved by over 30 percentage points versus Q1 results.
California, our hardest hit geography, and largest market was up 66% versus the decline of 18% in Q1 and.
In hospitality, our hardest hit vertical doubled in Q2.
<unk> versus a decline of 34% in Q1.
Segment profit margin benefited from lower workers' compensation costs, and higher bill rates compared to pay rates.
Which were partially offset by higher sales mix from our energy and industrial business.
Segment margin also benefited from cost management and operating.
Leverage.
People management revenue increased 28% while segment profit increased 79% was 60 basis points of margin improvement driven by operating leverage.
People management had $63 million of annualized new business wins through June primarily in the retail and transportation industries.
<unk> was $7 million of new business revenue recorded this quarter.
$26 million expected over the remainder of the year.
People Scout revenue increased 106% after being down 13% in Q1.
Segment profit of $11 million, yielding a 16, 9% margin.
Versus a loss of $3 million in Q2 last year.
Revenue benefited from strong recovery in our hardest hit industries.
Including travel and leisure, which grew 200%.
New business wins also contributed to revenue growth as people scout delivered $33 million of annualized new.
New wins through June this year versus $9 million in the comparable prior year period.
New wins generated $4 million of revenue in Q2 with $20 million expected over the remainder of the year.
Coming from a variety of industries, including retail health care and transportation.
Segment.
<unk> expansion was the result of cost management operating leverage and increased utilization of recruiting staff.
Now, let's turn to the balance sheet and cash flows.
Our balance sheet is in excellent shape, we finished the quarter with $105 million of cash no outstanding debt and an unused credit facility.
While our profitability increased compared to Q2 last year cash flow from operations decreased largely due to higher levels of working capital associated with our revenue growth and an increase in day sales outstanding largely associated with increased sales mix of people scale.
Which carries a higher day.
Sales outstanding in comparison with the blended average.
Our cash balance will drop in Q3 due to our repayment of $60 million in government payroll taxes that the government allows businesses to defer last year and.
And about $35 million of additional working capital from sequential revenue growth associated with.
The seasonal nature of our business and year over year revenue growth.
For additional details about our outlook for the third quarter and the year. Please see our earnings presentation filed today.
Looking forward, we're excited about the possibility of achieving a higher EBITDA margin in this economic cycle versus the last cycle.
Our technology strategies provide us with an opportunity to differentiate our services.
To capture more market share.
And take advantage of the operating leverage associated with our business model, while also creating a more scalable cost structure.
This concludes our prepared remarks, please open the call now for questions.
<unk>.
Okay.
As a reminder, everyone to ask a question you will need to press star 1 on your telephone keypad again Thats Star then the number 1 on your telephone keypad. Please stand by while we compile the Q&A roster.
Okay.
Your first question comes from the line of Jeff Silber.
Michael from BMO capital markets. Your line is now open.
Thank you so much I know you typically provide a charge.
Charts on intra quarter trends I know may be a little bit difficult this quarter, because the year over year comparisons are some difficult, but can you at least give us some high level color how the different businesses did in per quarter in.
Second quarter, and how <unk> started so far.
Hey, Jeff it's Derrek here.
Let's start with some of the Lumpiness from I'll just start overall from a company here.
So.
Where we ended in June was 36%.
I'll just give you all 3 months April was 48%.
May was 50% growth.
June was 36% growth.
If we talk about what's been going on in July.
Revenue growth through the first 3.
2 weeks was 21%.
That's a little bit lower than of course, where we exited the quarter predominantly because our.
Our staffing brands report revenue weekly, but people scale reports on a monthly basis and that was our largest growth inside of included in assets.
Okay, Great that is really helpful. I appreciate that.
Your prepared remarks, you alluded a few times to Bill Bill pay spread excuse me can you quantify that and can you also talk about what you're seeing on the wage inflation side as well.
Yes, I think yes worker supply is definitely having an impact on linear.
Parts of the business and we saw it show up in day rates.
Pay rates were up 10, 1%, which was an acceleration of over 3 full percentage points from where we were in Q1.
However, we have been have been passing that on to customers. So.
Revenue.
Our bill rates.
Rates exceeded pay rate growth revenue bill rates came at 10, 7% compared to the pay rate inflation of $10.1 per cent.
Are you seeing any pushback in any areas either vertical areas or geographic areas.
Where clients are not accepting.
Betting that this kind of bill rate excuse me bill rate inflation.
Jeff I'll get my commentary there and then Patrick can wait.
In this area both when it comes to worker supply into.
The pay rates necessary to get these workers customers have been pretty understanding.
I mean price is always a factor and a very important part of each discussion, but it's a pretty unique place customers are seeing it in their businesses. They understand the work with shortage. So I would say overall not just for the pay rates, but our ability to deliver a full roster and our complete plastic a full roster of.
Meaning all the positions that have been recruited and the challenges with that customers have been pretty understanding.
Patrick anything you want to add to that.
Well I think you hit it pretty pretty well derrek.
Jeff we're not seeing.
I mean pricing, obviously always matters, but we're not seeing a lot of pushback in part because.
Clients are trying to fill their own positions as well.
They know how hard it is and so.
We're just in a unique environment right now where demand is high stronger than in a typical recovery.
Clients are optimistic as the lockdown restrictions have largely eased and vaccination rollouts continue progressing.
This is a major major supply challenge right now that we think is.
The amount of long term or even medium term problem, it's more of a short term dynamic where.
Supplies artificially been held down for a variety of reasons, whether it's the pandemic or the enhanced unemployment benefits.
Those start to.
Wear off or ease off we expect supply is going to come back and come back pretty strong over the next couple of quarters.
Okay, that's really helpful I'll jump back in queue. Thanks, so much.
Your next question comes from the line.
And as those mogul from Sidoti Your line is now open.
Thank you good afternoon, Patrick and Derrek.
Yeah first question when thinking or looking at job stack.
When you talk about the heavy users, which markets are sector and when you when.
When you look at like construction transportation manufacturing.
<unk> is it 1 of those in particular are you seeing it really across the 3 main ones.
Well, Josh this is Patrick it's really across the board.
It's more relevant around the size of the client and the type of work that we're providing for them.
The heavy users.
Users tend to be the more steady client the ones that are larger in in their need for contingent labor.
Also 1 of the things we've noticed is that when you.
There is large burst projects or for clients that run multiple shifts can have short notice in terms of their needs.
Those tend to be the heaviest users of it doesn't necessarily breakdown is easy bye bye industry. Its really more of the nature of the demand that they have in the.
The degree of.
Of time that they can provide in terms of finding workers. So we've noticed that clients that have a very short duration in terms.
The day notice they can give us tend to be the heaviest users as well as 1 of the use of low volume.
Sure. Okay, and then just thinking about maybe some of the markets that are less penetrated or.
For total right now you know what is your go to market strategy with this technology, we're looking at hospitality.
Strong.
Are you seeing any success there.
Building up these the jobs back that that type of client base.
We all specific to your question.
Significant demand and hospitality because they have a lot of short burst needs, particularly around events concerts sporting events.
Moving rents short.
Just maybe stepping back for a moment big picture in our long term vision.
For for people ready and jobs back is to transform the way the industry engages workers.
47 ordering for clients sophisticated algorithms that match workers to opportunity.
That is more transparency for workers, where they can see the jobs 24, 7% more certainty.
More efficiency, where clients can improve time and right workers and things of that sort so.
We continue to be really encouraged by jobs back both on the supply.
And the demand side I'll talk a little bit about supply.
We.
We're using technology to communicate important information to our workers incentives nudges to check jobs lots of in App marketing and that is helping me, that's helping quite a bit with retention.
If you look at the average number of hours that are people ready.
Associate has though.
<unk>, 8%.
Year over year, so we're getting some additional retention.
Also on the supply side, we've talked about.
Some of the things we've done to digitalize Onboarding and cut application times that removed friction in the process and we've seen a nice uptick, particularly in the last month or so of applicant.
Those are up 90, and a higher conversion rate of applicants being converted from the top of the funnel.
The bottom of the funnel and then on the demand side, we continue to see healthy.
The healthy growth rates for those heavy users.
So it's a big big area of focus for us and ultimately we have a goal of growing well above industry.
We're also this once the market normalizes to more historical levels.
That's really helpful. Thank you I wanted to switch gears, a little bit maybe.
And I apologize I hopped on a couple of minutes late so if you've covered this thanks for humor me, but just higher level more macro from an industry wide perspective are you seeing larger clients.
Average dominantly did things in house, starting to open up to more outsourcing, especially given the supply constraints and if that's the case. This sticky do you think this is a potentially structural shift in how they may decide to handle their workforce needs.
Longer term.
Yeah. Thanks, Josh appreciate the question.
<unk> Pro as you remember a couple of years back sort of pre COVID-19.
We had seen some trends were.
Companies were taking portions of their outsourced arrangement and.
And moving them back in house, so it wasn't necessarily that theyre moving everything back in house, but pieces, particularly mission.
Critical.
Type positions.
Coming out of Covid as we're talking with clients, we've seen a complete 180 on that.
A number of our clients that had broad scope back in house or looking to.
Outsourced out again, we've had a number of new wins, we talked a little bit about.
Out in the prepared remarks that the people scout.
As more than 3 act the wins year to date versus last year and so we're seeing a lot of first time buyers that have never outsourced before that are outsourcing and if theres ever.
A reminder of having flexibility in our variable cost structure.
Pandemic highlighted.
Delighted that and so a lot of clients that we're talking with.
Are recognizing the need that.
It's a good idea to have a variable cost structure against the variable need like hiring and having big fixed cost structures within house teams for some companies makes sense.
For a lot of companies it doesn't seem so but once we've been.
In.
Talking with particularly recently.
That are first time buyers are citing that as a major reason of having a variable cost structure and not building up a big fixed cost structure, particularly in an environment like this where there is still some uncertainty.
Sure.
Thanks.
No I guess kind of just sticking on the labor supply theme and I always like to ask you is can you really have your your.
Your finger on the pulse of what's going on.
The labor markets and maybe we're still a bit early on still but are you seeing any.
Any meaningful signs of easing with supply constraints and if so is.
And just from specific or are we really just drawing lines between the states that are looking to curtail unemployment benefits are insisting from hiring credits or other benefits general thoughts around that.
Well I think it's early you know a lot of the states that have started to ease off the enhanced unemployment benefits there.
They're really early days in this.
And so.
I'll share with you a couple of numbers, but just know that it's you've got to kind of quantify this as being early days. So 1 of the early signs. We've seen is a about a 20% uptick in applications and people management as an example, where.
States are ending unemployment benefits earlier than the September 6th deadline that the federal government has put in place.
So that's an early early indicators that ads.
Some of the benefits start to wear where offer ease off that but people are going to come back to work.
My view is that there is ample supply, but it's been artificially held down.
Partly because of the.
Situation where parents.
Aren't dropping the kids up at school, partly health.
Weighted concerns and then.
Large part is the enhanced unemployment.
Benefits that are that are going to be rolling off for everybody first week in September and there are a number of other states allow sooner. So our view is that things are going to improve from a supply perspective, there may be some residue leftover People's bank accounts tend to be a little fatter right now.
Particularly at the lower wage areas, but those.
Those aware off soon enough in our view is that we'll be back to more of a normalized environment in a couple of quarters.
Alright, great. That's a helpful. Just 1 last 1.
Looking at guidance and thinking about SG&A and internal investments now how much of the expected spending.
In Q3.
2021, as a whole is regular day to day operations version versus the initiatives geared towards increasing sales resources in the client and associate retention programs I basically just trying to get a sense of the underlying fixed SG&A base or component going.
<unk> for your business.
Yes, I'll take that 1 Josh this is derrick.
Now how we take a look at this is how are we doing in operating more efficiently.
<unk> technology in a much broader sense.
Then we were a couple of years ago, we made.
Forward the adjustments to the business.
We run the business with challenged a lot of assumptions from so if you take a yes, it's really hard to compare back to 2024.
I guess obvious reasons of the Lumpiness of some unique.
Circumstances of EBIT for everybody in 2020, if we just take our SG&A as.
A lot of into revenue.
Now when we compare it back to where we were in Q2.2019, our operating.
30 basis points, less and Thats was $7 million of revenue. So we're definitely operating the business in a more efficient low as we take a look forward with the guidance that we put out there for the year.
If you take a look and kind of run the math on the back half of 2021, and you compare that to the back half of 2019.
Can be a very.
Similar trend, we believe to what we posted this quarter. So we feel like we've made a lot of adjustments that are sticking with running the business more efficiently.
As a percentage and we're operating in a bit of a new normal state now that will continue to carry for us.
Alright, great well, thank you for taking all my questions.
Okay.
Okay.
Your next question comes from the line of Mark Marcon from Baird. Your line is now.
<unk>.
Good afternoon, I was wondering if you could give us a little bit more of a feel in terms of the month returns on <unk>.
People management and people skills.
Sure Let me go to that framework.
Okay.
Yeah.
For people management.
April was up 42%.
<unk> was up 32% and June was up 17%.
And for people Scout April we're up.
4%.
104%.
June 138%.
When you when we take a look at the guidance from a revenue perspective.
For the coming quarter.
You termed it and kind.
Offset sequential fashion should we assume that.
<unk>.
But the bulk of the growth is going to.
Sequentially is going to.
Yeah.
The express.
Again in People's accounts, or how should we how should we think about it in terms of what your where.
Should we see maybe perhaps could be beneficial to have.
Already as well.
From a monthly perspective.
Sure well, let's flip to finish off the historical information for it and let's talk about shift our focus to looking forward. So keep already in April was 48%.
Where you are at 51% as of June 35%.
So it's really what we gave in our outlook section I wouldn't really call. It our guidance. We're just we're just giving everybody the math really on how revenue.
Trended sequentially between Q2 and Q3 are over.
Maybe some years 2020 exclude it.
When it comes to the growth rates.
Year over here, yes, we would expect those to be stepping down as worth going into.
Tougher comps I mean, if you want to call them total funding there.
Aggressively.
The declines that progressively.
Worse.
Quarter.
From a were talking about 5 business units Youll see.
The most falloff in the growth rate at least compared to where we've been the last couple of quarters, what people management only because people management has weathered the storm so all.
They've recovered.
Les we're still doing very very well, whereas people ready has not fully recovered and we would expect to see larger growth rate from people already.
People Scout is certainly at the top you know.
With this growth rate this quarter and you.
You take out Theres, no really expectation on why it would step.
Revenue per ounce sequentially on a dollar amount so the prior year comparisons relatively similar on.
Q3 of 2020 as it was in Q2 of 2020, so I think it'll.
Just on that alone will prove out to show some pretty.
GAAP growth rates continuing for people scale.
Great.
It did sound like you're basically just taking what your normal historical.
Sequential growth as opposed to extrapolating the last month.
Correctly.
Well, that's really what we've been doing ever since the pandemic share.
Mark we have not been getting traditional top and bottom line guidance.
But I do encourage everyone to go to.
Our outlook page in the back of our GAAP and what we're really doing is we're choosing where we think.
The most help might be needed both for the quarter and the year.
Net profit has some pretty prescriptive direction with some commentary, particularly on the middle of the P&L and letting investors from their own conclusions about the top line of the P&L.
Okay.
If you were if you were thinking about.
[laughter] apply be normal unhappy.
Im having low rates kind of a normal rate.
How much do you think how much higher do you think revenue would have been during this last quarter.
Track the flow rates.
Well I think what we want to just focus in on people writing more people management and again, it's still we're not seeing.
They have an impact.
Yes.
Management for a couple of reasons.
It's not because of worker supply is that much better but with people management, we get more notice on to fill the jobs. So if youre working with a week or 2 weeks of notice.
Because you're so much more opportunities to get the jobs filled versus if youre working with 1 day or 2.
Moving on pillar 2 hours in some circumstances, where people are ready now.
Not only does people management get more time to do what I just suggested to.
To do it on its own but in the event that it can't do it on its own. It also gives US time the business time to seek out other staffing companies to help fill that gap and thats important because we have more.
Preponderance of sort of service level agreements with clients that need to be net and we want to make sure that we're meeting those.
Turning back to the so that really leaves you with keep already now.
I mean, our fill rate that people are ready right now is running probably close 15 to 20 points lower than it was.
If we were looking back to prior to the pandemic or even during the pandemic. So it's had a sizable impact will keep ready business.
And then in the prepared remarks, you mentioned the.
<unk>.
The benefits that went into effect from July 15.
Is that noticeable when.
Of those 1 or 2 effect.
It's really too soon to tell we don't think it will have nearly as prominent effect as we saw with other stimulus checks that were deliver.
The child tax credit is $300 per month versus the next 12 months versus.
So we used $600 all at once.
You know in our <unk> business with some of the lower paid jobs when folks get $3600 or if you've got 2 or 3 kids you were to get it all at once.
So really sizable amount and not everyone wants to keep working to build the bank accounts.
It's a pretty healthy spread for a lot of people. So we did see.
Some some drop off in <unk> applications.
With earlier stimulus checks. This time, it's too soon to tell because were just really right on the cusp of this but we're not expecting it to be as significant as some of the other stimulus checks that went out.
Okay. That's good to hear and then.
Getting from can you just talk a little bit about.
The new service centers.
Sort of impact from those currently having in terms of.
<unk> see.
Yes.
I know, it's early days, but how would you characterize that.
So I can take that 1 Patrick yes, I can speak.
Thanks for the question Mark.
Right. It is early days, yes, it'd be pilot free run.
Uh huh.
Into Q4.
What we're seeing is early days.
Done really well on managing worker wages.
In the service centers.
Some of the other metrics that we're tracking.
Our mixed right now when we look at revenue and client count.
Associate count and things of that sort of a little bit of a mixed bag.
1 of the things. The reason you run pilots for this is to have learnings along the way and then make rapid midcourse corrections. So.
As we rolled these out at the end of March.
We've seen a number of opportunities to become more efficient.
For a more effective and so we're making midcourse corrections along the way and our expectation is that by the time. The pilots are complete we will be green on on all of the key metrics that we're tracking so things like associate account client count worker wage margin.
Please.
<unk>.
Overall revenue things of that sort.
There are many more metrics that we're tracking as well, but when you look at the main ones.
Those are the area of focus and then if all goes well our intention is to then.
In our roll this out on a much larger scale in 2022.
Margins, we got to get the metrics to where we want that would support the business case that we've put together and <unk>.
We'll keep you all updated as more information becomes available.
Great and then just in terms of the number of orders and understand supplier.
The key constraint here, but just in terms of order rates.
But first on people already broadly speaking would you say that those are continuing to improve broadly speaking of each and every quarter, even though the year over year growth Richard Impac.
Impacted by the fill rates.
Well 1 thing is certain demand is high and stronger than a typical.
So orders orders were very strong as Derrek mentioned, our fill rates are down about 15 points in people ready.
Versus where they would normally be and so our view is that as supply.
The supply situation starts to correct itself.
<unk>.
We recovered a lot of those unfilled orders are going to be filled.
So we're pretty optimistic about the about the demand side now and are optimistic about the supply side improving.
In Q3, Q4 and beyond so.
Our view is things are.
Things are lining up quite nicely.
Great.
You're going to have to spend any more from an SG&A perspective.
In terms of meeting the supply constrained environment remember words spend more for recruiting.
Or how should we think about that particularly if the supply should naturally lift with with some resumption of normality.
Well I wouldn't expect.
The cost of recruiting on a per higher basis to change from where they are at right now in terms of being higher I mean, a lot of that is already built into our run rate, we're definitely having to run some more background checks for the contingent labors per higher we're having to spend more money on.
So we are seeing.
Of candidates than we otherwise would but thats sort of all in our run rate already mark So I wouldn't expect to see anything from an SG&A perspective.
As a percentage of revenue.
From for recruiting.
Don't want upside down on us.
Great. Thanks for the color.
I am showing no further questions at this time.
Joe.
Well, Thank you operator, Inc.
1 thing I would just like to thank our employees our associates.
Our clients or business partners.
For their efforts throughout the pandemic and thank you everyone for attending we look forward to speaking with you at our next quarterly earnings call and hope everyone has a great rest of the week and be sure to Stacy.
And this concludes today's conference call. Thank you all for your participation and have a wonderful.
All of this.
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All day.