Q4 2022 TrueBlue Inc Earnings Call
Greetings welcome to true Blue fourth quarter 2022 earnings call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Derek Edberg, Chief Financial Officer. Thank you you may begin.
Good afternoon, everyone and thank you for joining today's call.
I'm joined by our Chief Executive Officer, Steve Cooper, and our President and Chief operating Officer Tara annoying.
Before we begin 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 we assume no obligation to update or revise any forward looking statements.
These risks and uncertainties.
Some of which are described in today's press release and in our SEC filings.
Good 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.
Our true Blue Dot com under the Investor Relations section.
For a complete understanding of these terms and their purpose.
Any comparisons made today are based on a comparison to the same period in the prior year unless otherwise stated.
Lastly, we will be providing a copy of our prepared remarks on our website at the conclusion of today's call.
And a full transcript and audio replay will also be available soon after the call.
Okay, now, let's turn the call over to Steve.
Thank you Derek and welcome everyone to today's call.
First I want to welcome Karen owing to the call Karen joined people Scout in 2010.
And has served as president of people Scout since 2012.
Karen has also served as president of people already since 2019.
In two.
2022 parent became president and Chief operating officer approval.
In this new role.
Karen is responsible for all operating brands, along with our people and technology strategies.
We plan to have Karen join us going forward to offer additional insight into our operational performance along with our people and technology strategies.
Before discussing our fourth quarter results I'm going to take a moment to reflect on 2022.
The year was marked by one of change not only true blue, but also within the business environment.
Since returning as CEO in June .
What has been clear is the strength of our people.
Who possess an unwavering commitment.
Serve our clients and the people we put to work.
As we started the year demand for our services was high as clients needed supplemental labor to support growth.
As the year progressed, the impact of inflation combined with higher interest rates.
The economic uncertainty, leading certain buyers to take a wait and see approach to hiring.
However, the labor market has remained historically tight with over 10 million job openings across the United States.
Many of which are for blue collar positions in which we specialize.
Despite the economy slowing into 2022.
I'm pleased with our performance over the past 12 months with revenue growth of 4% and operating income growth of 5%.
Moving on to results for the quarter.
Total revenue was $558 million.
Down 10% compared to Q4 2021.
Results across the business segments were mixed we.
We saw steady underlying revenue trends that people already and people management in Q4.
Our people Scout, we started to see the need for permanent staff and our clients begin to slow.
While operating income and margin were lower due to the decline in revenue.
We maintained pricing discipline at our staffing segments and remain focused on cost across the company.
Turning to the segments.
<unk> already has our largest segment it represents 57% of total trailing 12 months revenue.
And 59% of total segment profit.
People already are 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.
With consolidated service centers, both supported by our job stack mobile App.
Revenue for the quarter was down 13%.
If you recall.
In the fourth quarter of 2021.
People already benefited from a demand surge across the business as our customers found themselves in desperate need for labor during the peak of a post COVID-19 recovery.
The year over year headwind this year.
Setting this factor aside.
Sequential revenue trends remained consistent with typical historical patterns.
People Scout is our highest margin segment, representing 14% of total.
Trailing 12 months revenue.
And 30% of total segment profit.
People Scout as a global leader in filling permanent positions.
Our recruitment process outsourcing services.
People Scout revenue declined 16% in Q4 this year.
Changes in demand for <unk> services, typically lag our traditional staffing business.
And we're seeing this dynamic play out today.
Which is being compounded by more normalized hiring volumes.
People management represents 29% of total trailing 12 month revenue.
And 11% of total segment profit.
People management provides onsite industrial staffing and commercial driver services in North America.
The essence of a typical people management engagement.
Is supply in an outsourced workforce that involves multi year multimillion dollar onsite and driver relationships.
Revenue was down 2% in Q4 with monthly revenue trends holding steady throughout the quarter.
I'm going to spend the next few minutes talking about our strategies.
And we will then pass things over to Tara you talked about a couple of our operating priorities for 2023.
Our strategy of people already is to digitize the business model to gain market share and improve efficiency.
The United States temporary day labor market is highly fragmented with the bulk of the market made up of smaller companies in the industrial staffing segment, where people are already operates.
The smaller more regional companies not only lack an expansive branch network.
But also we're typically unable to invest in digital applications like job stack.
With over 90% associate adoption and 30000 plus client users.
Job stack provides a frictionless user experience for our associates and clients and has driven operational efficiencies.
The technology.
And the brick and mortar combination makes us a one stop shop for national and local accounts.
And is what makes us a leading provider within the odd demand industrial staffing market.
We believe the market for general Labor has the best opportunity for digitalization as it is less complex than other types of staffing.
And by further investing in jobs that we will be able to increase our traction and improve our appeal with clients and associates.
Now people Scout our aim is to capitalize on our strong brand reputation and ability to hiring in high volumes to gain market share within the <unk> industry.
It has consistently produced double digit annual revenue growth and favorable economic conditions.
In 2022 people Scout achieved record revenue as companies sought our expertise to find talent in tight labor markets.
A big reason for the success was the Phoenix our recruiting platform.
Which has allowed us to place better talent faster.
As we move forward, we plan to further diversify our hiring mix and target high growth sectors, such as life Sciences and technology.
Our positive track record penetrating healthcare.
<unk> experience and the cynics make this possible.
Before management strategies to supplement our traditional on site staffing services with higher margin product offerings.
Like onsite workflow solutions.
And commercial trucking and.
And expand geographically within the United States to increase market share.
Now I'd like to turn the call over to Terry who will discuss specifics about some key priorities as we enter 2023.
Thank you Steve.
Pleased to be here today to provide some insight on key priorities that are underpinning our strategy.
Before I get into the details I wanted to share some bigger picture perspective on how we are approaching our priority.
As Steve mentioned, we have been on a multiyear journey to digital what type of our business.
Strategy is based on what their expectations are fast and frictionless access to job and client requirements for efficient access to talent and recruiting and staffing platforms that offer superior candidate experience.
At the same time, we are a people business and our relationships with our clients.
And associates remain essential.
Our field team members salespeople and recruiters I'll play a vital role in building those relationships and we are working hard to ensure that our teams have the tools and resources they need to succeed.
By striking the right balance between relationship driven service and technology enablement.
We will remain well positioned to help our clients access the talent they need through our on demand and outsourced solutions.
So it should come as no surprise for 2023, and our people and technology will remain the primary focus for true blue.
We are a people business.
We have an engaged and high performing team is a top priority.
In order to attract and retain talent, we continue to build and enhance programs designed to enrich our employee experience and to emphasize learning and development.
We are also making focused investments in new positions to maintain sustainable staffing levels and strengthen our ability to deliver the services our customers expect.
We are augmenting.
Learning and development planning across the business.
It's been an important focus in 2023 will be entering our sales training is scalable and repeatable and all sales roles throughout the organization.
This training, we emphasize effective client interactions and one angle.
A thoughtful approach to driving repeat business and customer reactivation.
Coupled with training and development are targeted investments in field based physicians to provide greater geographic and vertical coverage.
Are people ready, we are placing account managers in new markets to capitalize on staffing demand in skilled trades.
We are also providing our branch managers with expanded sales training and increasing our capacity to sell our services.
Our people management, we will continue to target market expansion to respond to ongoing demand for drivers.
And finally at people Scout, we are augmenting our sales team to enable greater specialization in the health care vertical.
These investments are directed towards increasing sales activity and enabling operational excellence.
This will enable us to capture topline growth in the short term and will ensure that we are well positioned to expand market share when our customers return to growth.
Now shifting to technology.
It is imperative, we continue to invest in platforms to better service, our clients attract workers and support our people.
Through our people ready job stack application and people scatter phenix recruiting platform, we have got differentiated experiences to those we serve.
With jobs that we are focused on improving the associate experience in the near term.
We are making updates to the application, which will allow associates to register faster and reduce the time it takes to get them to work.
We are improving the ease of time entry so our associates can be paid more quickly.
And finally, we will be introducing conditional dispatches.
This functionality allows associates to accept the job prior to fulfilling all requirements such as documentation of a specific certification and so subsequently be dispatched once they have massive requirement.
These product enhancements are aimed at improving the quality and quantity of supply.
They position us to improve associate retention and increase our client bill rate.
Both of which will lead to higher customer satisfaction and ultimately more wallet share.
But then it is our people Scott recruiting platform designed to meet Canada expectations for a seamless experience.
Our Phoenix combines many facets of the recruiting process, including recruitment marketing applicant tracking candidate relationship management and interviewing to quickly bring our highly qualified talent pool to our clients.
But the next person instrumental in securing new client wins renewals and expansion.
And as we look forward the relevance of a Fedex will continue to increase.
Clients further prioritized the candidate experience.
Riding us with a catalyst for future growth.
I look forward to providing an update on the progress we make on both fronts on future calls.
I'll pass the call over to Derek who will share further details around our financial results.
Thank you Darren.
Total revenue for Q4, 2022 was $558 million.
A decrease of 10% compared to Q4 last year.
As Steve mentioned people ready benefited from a demand surge in the prior year period.
As the peak of the post Covid recovery left our customers in desperate need for labor.
As expected the surge did not repeat this year.
<unk> six percentage points of total revenue decline year over year.
The remaining four point decline reflects the companys underlying revenue trend.
Decrease from third quarter 2022, total revenue results, which were flat.
In the fourth quarter, our people scalp area business experienced lower volume from existing clients and to a lesser extent, so did our people management business.
As you might recall our people ready business was the first business unit to see a meaningful reduction in demand earlier this year.
People already is typically where we foresee an impact from macroeconomic conditions, given the short duration and supplemental nature of the job assignments.
We were pleased to see stable weekly sequential revenue trends for people ready during the fourth quarter that were in line with typical historical pattern.
Which has continued into January .
Net income declined 65% and adjusted EBITDA declined 42%, while net income and adjusted EBITDA margins declined 190, and 200 basis points respectively.
The decline in profitability was primarily driven by the revenue decline.
Operational deleveraging associated with the revenue decline.
And changes to business mix, given the larger drop in revenue within our people scout and people ready ready businesses.
Which carry a higher margin than our people management business.
Adjusted EBITDA margin contracted less than net income margin due to certain people ready technology costs, which were excluded from our adjusted results.
Gross margin for Q4, 2022 of 26, 5% was down 30 basis points.
As mentioned earlier a change in business mix had a contracting impact on gross margin, which was partially offset by lower workers' compensation expense and a positive bill pay spreads.
The better workers' compensation results are from a combination of favorable development on prior year reserves.
And fewer workplace injuries this year.
The positive bill pay spread results are due to disciplined pricing efforts and our people ready business.
SG&A decreased $4 million or 3% compared to Q4 of last year as we remain focused on cost management.
SG&A increased as a percentage of revenue due to operational deleveraging associated with the revenue decline.
Our effective income tax rate was a benefit of 1% due to hiring tax credits exceeding the income tax expense of shows associated with our pre tax income.
Now, let's turn to the specific results of our segments.
People ready revenue decreased 13%, while segment profit decreased 18% and.
And segment profit margin was down 50 basis points.
As we've mentioned people already benefited from a demand surge in the prior year period, which accounted for 11 points of the year over year decline.
The remaining decline of two points.
Reflects people readies underlying revenue trend for the quarter.
Which was roughly in line with a total revenue decline for this business unit in Q3 2022.
The drop in segment profit and related margin came from the revenue decline and operational deleveraging.
Which were partially offset by lower workers' compensation expense.
And favorable bill pay spreads.
Pay rate inflation in the people ready business has moderated during the back half of 2022.
Yes, Bill pay spreads have continued to be robust.
Bill rates grew eight 4%.
Pay rates grew six 4%, resulting in a positive spread of 200 basis points.
People Scout revenue decreased 16%, while segment profit decreased 78% and segment profit margin was down 10 percentage points.
During the quarter, we saw RPM business volumes that some clients will revert back to pre COVID-19 levels.
All others reduced hiring as a result of the macroeconomic environment.
In addition, we made a revenue reserve adjustment, which dropped straight to the bottom line.
Segment profit and related margin were down due to the revenue decline revenue reserve adjustment and operational deleveraging.
People management revenue decreased 2%, while segment profit decreased 8% and segment profit margin was down 10 basis points.
Monthly revenue trends were steady during the quarter performing in line with historical patterns.
The decline in segment profit and related margin was mainly due to the decrease in revenue.
Now, let's turn to the balance sheet and cash flows.
We finished the year with $72 million in cash and no outstanding debt.
The business is producing strong cash flow with full year cash flow from operations totaling $121 million and.
And we returned $61 million of capital through share repurchases during the year, leaving $89 million authorized.
Now I'd like to take a moment to provide additional color on some forward looking items.
We expect a revenue decline of 18% to 13% in Q1 2023.
Similar to Q4 of 2020 to Q1 of 2023 is also facing a demand surge of 7% in the prior period comparison, which.
Which translates into an underlying revenue decline of 8% based on the midpoint of our Q1 2023 outlook.
The Q1 2023 underlying revenue decline is expected to be a bit larger than it was in Q4 2022.
This is primarily due to an expectation of less year over year growth in our green energy business in Q1 2023.
Associated with the inherent lumpiness in the timing of projects.
Rather than a more pessimistic view of future revenue opportunities.
As we look forward Q2, 2023, we'll also face a headwind.
Four points due to the demand surge in the prior year.
I'll also highlight one change to our adjustments to net income.
As we transition certain on premise technologies to the cloud we felt an adjustment for software as a service amortization was helpful for comparability purposes.
Now that this cost is somewhat stabilize we.
We will no longer be including it as an add back in our adjusted net income calculation.
However, it will continue to be included in our adjusted EBITDA calculation given that these costs are reported in SG&A and are taking the place of depreciation for former on premise technologies.
One last item before you wrap up.
As a reminder, the 2023 fiscal year, we will have 53 weeks, which is a typical occurrence every five years to six years since we operate on a 52 week fiscal year versus the calendar year.
This extra week will provide incremental revenue for the year of $22 million to $27 million, but will not contribute additional profit as it is an annual low point for weekly revenue.
For additional details on our outlook. Please see our earnings presentation filed today.
This concludes our prepared remarks, operator, please open the call now for questions.
Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment may be necessary to pick up your handset before pressing the star.
He is.
Our first question is from Kurt.
Metre with North Coast Research. Please proceed.
Good afternoon.
Maybe just.
Just any I guess anyone on the management team I apologize.
Just your thoughts on kind of the economic outlook I know.
You've talked about labor market being tight obviously.
And I'm just wondering.
In relationship to kind of where the where you thought the economy was maybe in the fourth quarter, where you kind of see it now.
Just thoughts going forward.
Hey, Thanks Kartik this is Steve.
I think thats in the middle of the Bull's eye that question about where are we going and how fast in this economy.
As Derek said.
Remarks.
It's hard to grow this business without a good economy and we've all seen the impact of.
Interest rates and the slowing that has done but we've also seen this powerful news and how many job openings that we have so balancing those two and trying to figure out where spend will be as part of our supply and the resources in the right spot at the right time.
We're feeling good about it.
This trend that labor it or that people already has been on a consistency for over a quarter four five months.
That's a pretty consistent pattern.
Except for the prior year surge that Derek.
Called out.
That gives us a lot of confidence that we are participating in a pretty good economy, where we are except for the prior year surge that had happened.
Second to come with that is.
Full time hiring and.
These positions are open yet.
Lot of companies.
That are.
I don't know if its a freeze is the right word, but some caution in their hiring.
Is out there that we know so we know.
We're in a spot of I don't know if at equilibrium yet that we're ready to start growing through all of it but we're pretty happy with where our industrial staffing business sets and we're watching carefully we're our apio business sets.
And that's what I'll say about that so the interest rates are definitely hurt buying activity and then movement of goods.
<unk>.
We'll see where that ends up later in the year to Derek wants to add anything to that I'll add a little bit too I'm glad you asked the question Kartik.
We're looking to 2023, we're still approaching it with caution.
We're planning our business that theres going to be softer macroeconomic conditions. We think that's the prudent thing to do.
However, where we stand today, if we're talking about well how are we feeling today about the future for 2023 to where we were a quarter ago. We are incrementally more optimistic about it from where we were as Steve mentioned the activity thats going on with jobs I mean, the number of open jobs, just went up to $11 million.
The job of hiring activity has been relatively strong we saw the ADP report. They say that's that's weather will all stay tuned on that but if you take a look at that in a strong GDP quarter that just finished.
Given all of the interest rates hikes and inflation coming down so it's just suggesting to us from what we can see the labor markets, which we think is a really important part of the economy is navigating its way through.
Some of these challenges that have presented this year so.
I think that's our overall take rate there.
That's helpful and just one last question just on SG&A.
There is unfortunate.
Incident in the economies towards kind of trailing off faster than anybody is anticipating.
I guess, how quickly can you just on costs.
And how quickly would you.
Well I think it would depend on what we actually experienced in the severity of the downturn.
As I talked about earlier, we are expecting a softer macroeconomic conditions. However, we put out annual guidance for at least on the SG&A line, that's relatively close to how we finished up 2022.
We took $40 million of cost out in 2020 $30 million of that still fits.
Ah remains outside of our cost structure a lot of that is in the people ready business. So we've really slimmed that business down to the minimums of what it takes to keep these operations open.
So.
Getting any more of that we're really concerned for if we cut a dollar of SG&A, we're going to lose even more on gross profit dollars and so we're really trying to look at managing this business to maximize the amount of profit over a complete economic cycle.
And with where labor conditions are and the tightness of the labor pool, that's not just for our customers it's for us too.
And as much advancements that we've made from from a digital perspective from a technology perspective, we still need people and relationships with customers that sold face to face things happen service wise that need adjustments, we need good people that know our business nor technology, nor our processes.
And most importantly, our customers' needs change through the year, we have to stay close to that so we're being very mindful to not take that too far.
If we get into a deeper darker recession, we're going to have to take another look at that but that's not our plans as we sit here today.
And I appreciate the question to occur because it's balanced with your first question on thought to the outlook.
The fact that we're playing this SG&A card to run strong and keep and as Karen had mentioned key people trained and keep our staff in line is we're playing the cards that we believe we are ready to balance and that we're ready to take advantage of the upswing. Your second question, though is how fast we can react.
Something different happens.
And really built into our model is that our recruiters people scout.
Our variable cost.
And to.
To some degree depending on how bad it gets.
People already that that becomes a variable cost based on how many branches, we have running and how many people we have in those branches. So we have a lot of variability and then all of our bonus programs that we're paying these recruiters.
<unk> specialist is all on a variable.
Model also so this will ramp up and down and we'll watch very closely but for now we like the cards were planned because we want to be ready on the bounce back.
Perfect. Thank you so much I really appreciate it.
Our next question is from Jeff Silber with BMO capital markets. Please proceed.
Thanks, So much and I just wanted to welcome <unk> to the call as well.
Before I ask my question I, just wanted to say something publicly it looks like the data services had an incorrect estimate for us for the quarter. We were actually at 38, not the 69 cents that they show, which mean consensus was probably closer to <unk> 41 52.
Because the headline stay that you missed report consensus estimates you might've actually reported a slightly we're trying to have this correctly, but I just wanted to let everybody know that first.
Just move another great question, Jeff. Thank you no worries.
Just moving on to my questions can we talk about trends intra quarter and what you've seen in January and is it possible to give it out by segment that'll be great.
Yes, let's talk about it.
Our people management trends the quarterly trends were very consistent actually for all three segments, the quarterly trends or excuse me the monthly trends were pretty consistent throughout the quarter. So there's nothing really to point out through the quarter.
Now as.
As we go into January that continued for the <unk> business the underlying trends still hold are holding up quite steady.
Our people management business.
It was low single digit in growth.
In the fourth quarter that held on a monthly basis going into the first quarter, though.
We're seeing some softening there you know.
We've got clients that are in retail and transportation that theres, just sand, we're expecting to have a little bit lower volumes retail held up quite well in Q4 compared to their original expectations, where theyre going to be but some of that was through discounting and promotions of inventory, which won't carry into the first quarter.
And for people scale, we don't Bill on a weekly basis, but as you saw from our results here in Q4, we were down about 16%.
In Q4, we're looking at about the same.
Trajectory in Q1, now I will say that if people scouts, 16% decline.
Half of that was from one client.
That is having its own challenges.
We're still expecting about the same amount of revenue decline in our outlook for the first quarter four for January .
We're seeing clients coming back and saying Hey, we're just going to we're going to hold for this month, we're going to delay till next month.
And so theres, some softness coming from that but I'll also say.
We're not surprised by that are people ready business leads.
It has we saw that in the second and third quarter, we talked about that is holding steady in and seeing some softness following.
Perm.
Area is not a surprise to us at this point.
Alright, that's helpful. If I could dig down a bit further and people Scout I don't think you broke that brand out separately in prior recessions, but you had it during the pandemic and in looking at my model.
Scott revenues fell over 40% in one quarter, but recovered fairly quickly should we expect that kind of volatility. If we are heading into a recession would this be the most volatile of your three segments.
Well I would be really surprised if we had anything as volatile as what we had in 2020 now remember when we had that significant decline that you just mentioned.
Most of that was around different forms of hospitality.
Airlines hospitality hotels that was a third of the mix of our business and as you know in 2020.
That segment got really hammered so.
So I wouldn't expect that kind of volatility now the people scale business in and of itself is a little bit more lumpy because the revenue per customer.
The proportions to the total revenues is a higher there's not near as many customers. There as there is in say our people ready business. So it can be lumpy at times, but I wouldn't I'd be really surprised.
That kind of revenue decline again on a year over year basis.
Okay. That's really helpful. If I could just sneak in one quick one you mentioned or a revenue reserve adjustment and people Scott in the quarter can you just quantify what that was for us.
Sure that was.
Maybe about $3 million.
It comes to revenue recognition for our people scale business is pretty straightforward. We go and find candidates we turned over some candidates to hiring manager they select one and right around that point revenue gets recognized.
Now with that said, we do have other agreements with those same customers.
Volume.
<unk>.
Annual volumes that have to be estimated.
Certain turnover ratios different different things that are built into these so we've always had some form of what we referred to as our revenue reserves.
Adjustments that are made.
There's usually a few little ones that go one way a few that go the other way this particular quarter. They just all seem to go one way so.
So this is the first time that we've talked about it in 10 years.
I wouldn't be surprised if we didn't talk about this for another 10 years.
Alright, thanks, so much.
Okay.
Our next question is from Mark <unk> with Baird. Please proceed.
Just wanted to follow up on some of John's questions.
With regards to just people scale.
Hello, and welcome to the call Im wondering given your expertise in the area can you describe a little bit more about like what you were what you were seeing there just in terms of the one large client that accounts for half.
Is that kind of is that kind of a temporary one time thing or were they just over hiring post COVID-19 and now its getting back to normal and then what did you see with the other players.
Were there any clients that had been lost or or anything along those lines.
Thank you so much for the welcome excited to be here.
Related to the the customers that have the decline this quarter.
It's a large retail customer who had declining volumes within their business and in the quarter. We helped this customer with their search hiring during the holiday season and during other periods of of searches within their business. So we had a combination of a couple of things going on first data.
Got it.
We need to hire as many people and secondly, they didn't have as many people.
That are on staff busy with with work on the sales floor and so they had those individuals' supplement by doing some recruitment themselves. So that's what drove that decline in in this quarter with the large customer.
Great and then what are you seeing what the others is that is it fairly steady and have you retained all of your customers are there are there any sort of.
Contracts that might be.
Terminated or winding down or anything along those lines.
Yeah, I would say just overall.
The sentiment that we're hearing from our customers is really around uncertainty about their short term.
Staffing needs and so in our Apio, specifically customers, we're seeing a lot of activity from first time buyers. They are really interested in getting support with <unk>.
With their hiring however, they have been slower to make long term hiring decisions. So we are seeing a surge in some of our shorter term offerings like recruiter on demand and some project <unk> where.
We're able to support our customers rapidly with their needs now while they sort through what they are hiring volumes are going to be for the long term.
But otherwise as Derek mentioned, we have some customers that are.
Slowing down their hiring there being more hesitant there going on and off holds and really just trying to sort through what they are hiring volumes are going to look like this year, but otherwise we.
Or just in current course of business trying to support them with the needs that they have right in front of them. Yeah. Mark. This is when it comes to the People's Count business. This is really a story about our customers hiring volumes coming down interestingly enough. It's not because we don't feel have open jobs.
<unk>.
While all of these customers are not sure where things are going.
At a company one of your worst fears as you hire some people in 2346 months later, you have gone back to those people and saying we're sorry, we got to let you go.
That's not good for the people, it's not good for the business and so there are many of our customers that are in that spot trying to understand where things are going and they are saying, we're going to just hold or we're going to pause from the latest month and everybody is talking to their employees everybody else. Just can help you by everyone's going to have to get back till we get some more direction on where our own.
Business is headed in and Thats, what we are saying, yes, and I would just add one more point, we saw volumes in 2022 with our customers that were really high because they were experiencing turnover like they had never experienced before.
And many of those customers have good plans in place to bring that turnover down which is just naturally bringing down that turnover in the hydrant volume accordingly.
That's great color and then.
Just given the comment with regards to the one large one having that surge in Q4.
The prior year and not having it this year does that mean that.
Should we think about the <unk>.
Revenue decline, but we ended up seeing here.
In the fourth quarter should that continue into the first quarter.
Because presumably that retail client wouldn't have had the same level of surge hiring in Q1 a.
A year ago.
Yes.
Expecting the revenue decline in Q1 for the people scale business to be.
Pretty close to what we had this quarter, albeit from a different path. So yes. If you took the 16 points of revenue decline in the adjusted for this one customer we talked about we'd be more at about 9%.
Excluding that customer however.
Going into the first quarter were hearing from more clients not anything big but more positive and so we're getting we're expecting to be at about the same revenue decline.
Just getting there through a slightly different path than what you saw in Q4.
Okay, Great and then how should we think about the staffing levels in.
Internally, we've been true blue for for the people Scalp Division, how should we think about the expense profile of that business.
Things are going to continue along these kind of path.
Yes.
The great news at People's Scow is that the model is built to scale up and down to meet the the hiring volumes of our customers and so from a recruiter and are recruiting coordinator perspective, we do have a flexible staff that we are able to scale based on the hiring volume it's built into the model. It's a big reason that customer.
<unk>.
As to outsource to us so that we can bring them that level of scalability.
So turn gave you the most important big picture I'll, just give you just a little bit of geography. So just to also understand.
As we make those adjustments it won't show up in our SG&A, our recruiters are actually in our cost of sales.
And so it turns talking about our actions will be taken.
As it's needed as volumes come down the scale the recruiting resources to the the amount of demand to keep the gross profit percentage in that business hole.
Great.
Then can you give us a little bit more granularity with regards to you know.
It's the people ready.
Just in terms of like what Youre seeing in different regions different end markets. Just in terms of what's growing a little bit softer aside from the retailers that you had already mentioned.
Repair to store.
What what else seems to be.
Either changing on the margin and what are you seeing any green shoots in terms of areas that are that are picking up more.
Yes, if we talk from a geographic perspective theres not much news there you can take a look at the states and the.
The trends there you take a look at them and it's just very close to the aggregate for the overall people ready business.
If you take a look at by industry there are some different bands.
The areas, where we see the most pressure.
If you're taking a look at year over year trends transportation.
Services and retail those would be the leaders of the pack and those declines would be higher.
Higher than the aggregate percentage revenue decline that we reported.
Areas that are not experiencing as much pressure and would be below that would be construction manufacturing hospitality still having some declines but holding up better.
The Green energy space is one that's been growing for us. This year, that's a bright spot Canada has been a bright spot for us.
Tim could probably elaborate a little bit more on our green energy plan, but with the.
Some of the legislation that was passed in the inflation reduction Act Theres a lot of incentives around green energy and that's an area that we're pretty bullish on.
Great and then Steve can.
Can you talk a little bit about where you're how you're thinking about the.
The office.
Program with regards to.
People ready.
It sounds like we put some things on hold in terms of centralization.
Any updates in terms of their or steps with regards to job stack and and what percentage of the volume is being filled through job stack now.
Yeah, I'll kick off that and then I'll, let I'll, let Karen add little color to that but.
We recognize the importance of these branches. This is what's worked for us for 30 years, and we understand that and.
Taking care of the employees to take care of the customers when they're out there doing two for Tuesday, two people two for two days and that that.
Blocking and tackling that it takes to run that business, it's very contact sport, where you've got to have your teams focused on the right things and art and Tara and her leaders and people are ready or are doing that.
We're focused on local accounts growing local accounts.
In our market last week.
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708 different branch managers, and two or three of them that are really great at blocking and tackling of winning local accounts.
It's very possible.
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That's where our energy is right now.
Centralization is a great idea and Thats, a great way to save some costs, but not at the cost of losing revenue and losing employees. So we are calling it a time out there for a bit until we have a few more of a reduction of ROE on what it really takes to roll that out with the power that.
Is good for our customers and good for our associates and we're close but we just didn't quite hit the nail on the head. So we're going to pause that for a bit and we're going to stay focused on these branches.
Where we've been.
Where we do have service centers there okay.
Ensure that we're doing okay. There is one big area of are people ready that went first and we close branches and actually the results are holding pretty steady to the rest of the company. So the reason to not go faster is we've got to do better for our customers and our associates when.
Having the right technology and having the right training programs and play in those centers. So we'll come back to it mark, but youre not going to hear us.
Beat that drum a lot until we're prepared and do a bit better let me ask Terry to give a little color. There and you can also talk about how we're doing with job stack, yeah, absolutely, Steve Steve said it well, we're just squarely focused right now and Sherry to ensure that we are providing great service to our customers and keeping our relationships strong.
I'll talk about job stack jobs back as you know has been a critical component of the people ready business.
Helping us connect with our clients and associates through that digital experience.
Operating in a tight labor market job stack has allowed us to maintain constant contact with our associates. We've got 90% of our associates that are using the app and client adoption continues to increase as well we've got about 30000 clients engaged the jobs back out at this point.
So it's certainly helping us with the connection point and it's also enabled us to achieve some of those cost efficiencies that Derek talked about earlier and the dollars that we were able to remove from operations in 2020.
That's terrific. Thank you.
As a reminder to starwood on your telephone keypad, if he would like to ask a question. Our next question is from Marc Riddick with Sidoti. Please proceed.
Hi, good evening everyone.
Hey, Mark Hey, Mark.
And I want to Echo everyone's comments and welcome Todd.
On the call and looking forward to working with you going forward.
Thank you.
I wanted to touch a little bit we've talked quite a bit about the trends I was wondering if you talk a little bit about cash flow and cash management and prioritization.
Certainly it's nice to have a good balance sheet and complicated times, but I was wonder if you could talk a little bit about maybe where you are what are your thoughts are there for this year and then I have a couple of follow ups.
Yes.
Well when it comes to our capital strategy.
Not a lot has changed.
We are very glad we got such a strong balance sheet taken a look at where things might go economically, but we're well prepared for that so.
That's not a concern of ours on the longevity of the business.
If we needed to do something with capital and pull it to support the business.
I'll put a checkmark behind that one.
When it comes to acquisitions, we're less interested in acquisitions in our in our staffing businesses.
We think our biggest opportunity right now is continue to digitalize this business increase our relevance with customers increase our relevance with.
With candidates and with.
With the workforce.
And that's really our best return right now and we're really pleased with our progress acquiring into that we think would be a distraction and theyre just not at any opportunity out there to pull another business into that.
Opportunity wise that we can see can outrank, what we're doing with our digital strategies, maybe if there were some some technology that would enhance that that'd be a different story, but just going out and buying more staffing firms and testing them in isn't isn't really something we're particularly interested in.
Now when it comes to the <unk> business, that's a different that's a different story.
With the <unk> business there is areas like life Sciences, our technology that we'd be very interested in getting a bigger presence in.
We have those presence actually with many of our clients. They have technology positions and we're feeling that what we're talking about is adding more specialization.
And Morris Street credibility from a logo perspective.
Two technology firms.
Or two life science firms.
And having that really helps us in the in the landing of the deals when it comes to stock repurchase.
That's something that we've continued to be interested in and.
We do like to be opportunistic.
Repurchase program. So that's all I'll say on that but those are our three broad categories of where we want to spend our money in.
Nothing has really changed from those three.
Yeah.
Okay, Great and then I was wondering if you touch a little bit about the.
The pricing environment, and what youre seeing in the businesses and whether or not there's been any impact I understand the client's hesitancy, but maybe if you could talk a little bit about what.
What we're seeing with the rates and if theres been any changes or anything noticeable there Angelo.
Well I think the standout from a pricing perspective really is our people ready business you know our people ready business. These these are smaller jobs oftentimes their supplemental their project and so that's one dynamic we have going for us is.
We get to reprice this business all the time.
And our business units are really doing a great job of it.
I just was looking before I came in here to the call I was looking back at some history on positive Bill pay spread I had one that went back 10 years.
The positive bill pay spread for the year here people ready is about 180 basis points.
There was nothing that even came close to it.
So you know where the business is really pricing it based on the value that we're contributing to the customers. We think that we are delivering a really good value as far as the quality of what we're presenting.
And the supply demand imbalance.
And some of that our folks are needing us even more than they've ever needed as before in trying to find good candidates the.
Markets are tight we know how to find that and it's coming through in the pricing.
I don't know I'll pass over to Taryn, maybe as Terrence if you want to add anything to that and make any comments about about people management or people scale.
Yeah, I, just I'll Echo your sentiment Derek we've just had great success.
Making sure we're able to get the right pay rates to our associates and then the bill rates to get the jobs filled on their behalf.
Great. Thank you very much.
And that will end our question and answer session. So we may conclude today's conference. Thank you for your participation and have a wonderful evening.
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