Q3 2023 TrueBlue Inc Earnings Call

Speaker 1: Greetings and welcome to True Blue third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Greetings and welcome to true Blue third quarter 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host Derrek Gafford, Chief Financial Officer. Thank you Derek you may begin.

Speaker 1: It is now my pleasure to introduce your host, Derek Gafford, Chief Financial Officer. Thank you, Derek. You may begin.

Yeah.

Speaker 2: Good afternoon, everyone, and thank you for joining today's call. I'm joined by our President and Chief Executive Officer, Tara Nolan.

Good afternoon, everyone and thank you for joining today's call I'm joined by our President and Chief Executive Officer, Terry Dolan.

Speaker 2: Before we begin, I want to remind everyone that today's call and slide presentation contain forward-looking statements.

Before we begin I want to remind everyone that today's call and slide presentation contain forward looking statements.

Speaker 2: all of which are subject to risks and uncertainties, and we assume no obligation to update or revise any forward-looking statement.

All of which are subject to risks and uncertainties and we assume no obligation to update or revise any forward looking statements.

Speaker 2: These risks and uncertainties, some of which are described in our press release and in our SEC filings, could cause actual results to differ materially from those in our forward-looking statements.

These risks and uncertainties some of which are described in our press release and in our SEC filings could cause actual results to differ materially from those in our forward looking statements.

We use non-GAAP measures when presenting our financial results.

Speaker 2: We encourage you to review the non-GAAP reconciliations in today's earnings release.

Courage you to review the non-GAAP reconciliations in today's earnings release or at <unk> Dot Com under the Investor Relations section for a complete understanding of these terms and their purpose.

Speaker 2: or at trulavu.com under the investor relations section for a complete understanding of these terms and their purpose.

Speaker 2: I do want to highlight one change involving the tax impact of our adjustments when calculating our adjusted net income measure.

I do want to highlight one change involving the tax impact alright adjustments when calculating our adjusted net income measure.

Speaker 2: We will now be tax affecting all taxable and deductible adjustments using our statutory rate of 26% versus our prior method of tax affecting adjustments using our blended effective income tax rate.

We will now be tax affecting all taxable and deductible.

<unk> using our statutory rate of 26% versus our prior method up tax affecting adjustments using our blended effective income tax rate.

Speaker 2: as we believe this provides investors with more useful insight.

As we believe this provides investors with more useful insight.

Speaker 2: For your convenience, we have provided a reconciliation of US GAAP net income to adjusted net income and adjusted net income per diluted share using this approach for all prior quarters and years back to 2021 on the financial results page under the investor relations section of our website.

For your convenience, we have provided a reconciliation of U S. GAAP net income to adjusted net income and adjusted net income per diluted share using this approach for all prior quarters and years back to 2021.

On the financial results page under the Investor Relations section of our website.

Any comparisons made today are based on a comparison to the same period in the prior year unless otherwise stated.

Speaker 2: Any comparisons made today are based on a comparison due to the same period in the prior year, unless otherwise stated.

Speaker 2: 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.

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, Let's now turn the call over to Tara.

Speaker 3: Thank you, Derek, and welcome everyone to today's call. We appreciate you being with us.

Thank you Derek and welcome everyone to today's call. We appreciate you being with us.

Speaker 3: Revenue for the quarter was $473 million, down 18% compared to the prior year.

Revenue for the quarter was $473 million down 18% compared to the prior year.

Speaker 3: Our results are reflective of a challenging environment in staffing and recruiting.

Our results are reflective of the challenging environment and staffing and recruiting.

Speaker 3: across most True Blue verticals and geographies, our clients remain cost-conscious and selective about the temporary and full-time positions they choose to fill.

Across most curlew verticals and geographies, our clients remain cost conscious and selective about the temporary and full time positions they choose to fill.

Speaker 3: Our teams are staying highly engaged to help our clients navigate this uncertainty and to ensure we are poised to support them when their staffing needs expand.

Our teams are staying highly engaged to help our clients navigate this uncertainty and to ensure we are poised to support them when their staffing needs expand.

Speaker 3: We are being proactive with our sales approach by leveraging our playbooks and centralized teams to capitalize on every opportunity. And we have a particular focus on high growth verticals and under-penetrated geographies nationwide.

We are being proactive with our sales approach by leveraging our playbooks and centralized team to capitalize on every opportunity and we have a particular focus on high growth vertical and underpenetrated geographies nationwide.

Speaker 3: Additionally, we are pursuing shorter term projects and offering flexible solutions to clients in order to meet immediate needs while positioning us for future expansion opportunities.

Additionally, we are pursuing shorter term projects and offering flexible solutions to clients in order to meet immediate needs, while positioning us for future expansion opportunities.

Speaker 3: Along with our current focus, we remain highly committed to our longer-term strategic priorities, including advancing our digital capabilities to position us to gain market share.

Along with our current focus we remain highly committed to our longer term strategic priorities.

<unk> advancing our digital capabilities to position us to gain market share.

Speaker 3: For instance, we are enhancing our job stack and Affinix platforms to drive greater efficiency and improve the client, associate, and candidate experience.

For instance, we are enhancing our job stack and authentic platforms to drive greater efficiency and improve the clients' associates and candidate experience.

Speaker 3: We are also committed to expanding both our scope and our footprint.

We are also committed to expanding both our scope and our footprint.

Speaker 3: For example, within staffing, we're focused on high-growth sectors such as renewables and skilled labor placements.

For example, within staffing we're focused on high growth sectors, such as renewables and skilled labor placement.

Speaker 3: Within RPO, we're focused on high-growth verticals such as healthcare, as well as diversifying into higher skill placements and more specialized product offerings.

Within our PEO, we're focused on high growth verticals, such as health care as well as diversifying into higher skill placements and more specialized product offerings.

Operator: Greetings and welcome to TrueBlue, 3rd quarter, 2023 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

Speaker 3: Gaining market share and under-penetrated geographies is also a focus across our driver, skilled trades, and RPO businesses.

Gaining market share in under penetrated geographies is also a focus across our driver skilled trades and <unk> businesses.

Operator: If anyone wants to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker 3: While industry demand is currently subdued, the long-term outlook for staffing remains positive, and we are well positioned to capitalize.

While industry demand is currently subdued the long term outlook for staffing remains positive and we are well positioned to capitalize.

Speaker 3: We have deep expertise in staffing an RPO, a strong footprint, leading technology, and significant resources.

Operator: It is now my pleasure to introduce your host, Derrek Gafford, Chief Financial Officer. Thank you, Derrek. You may begin.

We have deep expertise and staffing in our P O a strong footprint, leading technology and significant resources.

Speaker 3: Our team is incredibly talented and committed. Our values are strong and we have a compelling mission.

Our team is incredibly talented and committed our values are strong and we have a compelling mission.

Derrek Gafford: Good afternoon, everyone, and thank you for joining today's call. I'm joined by our president and chief executive officer, Taryn Owen. 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 advise any forward-looking statements. These risks and uncertainties, some of which are described in our press release and in our SEC filings, could cause actual results to differ materially from those in our forward-looking statements.

Speaker 3: True Loop provides a vital service, and we remain ready to serve our clients immediate and future needs.

Sure loop provides a vital service and we remain ready to serve our clients immediate and future needs.

Speaker 3: Before I turn it over to Derek for further discussion on our results, I want to take a moment to thank him for his leadership and numerous contributions to True Blue during his more than two decades with our company.

Before I turn it over to Derek for further discussion on our results I want to take a moment to thank him for his leadership and numerous contributions to true blue during his more than two decades with our company.

Speaker 3: He has built a digital and people first finance organization with a deep talent bench that will continue to serve us well. And our entire organization is grateful for his contribution. Thank you, Derek. I'll pass the call over to you, Derek.

He has built a digital and people first finance organization with a deep talent bench that will continue to serve us well and our entire organization is grateful for his contributions.

Thank you Derrick I'll pass the call over to you now.

Derrek Gafford: We use non-gap measures when presenting our financial results. We encourage you to review the non-gap reconciliation and today's earnings release, or at trulvoo.com under the Investor Relations section for a complete understanding of these terms and their purpose. I do want to highlight one change involving the tax impact of our adjustments when calculating our adjusted net income measure. We will now be tax-affecting all taxable and deductible adjustments using our statutory rate of 26% versus our prior method of tax-affecting adjustments using our blended effective income tax rate.

Thank you Darren.

Speaker 2: Demand for our services continues to be soft as businesses of all sorts face a tough balancing act.

Demand for our services continues to be soft as businesses of all sorts face a tough balancing act.

Speaker 2: On one hand, labor pools remain tight and businesses recognize how critical retaining talent is in today's environment.

On one hand labor pools remain tight and businesses recognize how critical retaining talent is in today's environment.

On the other hand.

Speaker 2: businesses have seen significant increases in pay rates, particularly with positions at the lower end of the pay scale.

Businesses have seen significant increases in pay rates, particularly with positions at the lower end of the pay scale.

Speaker 2: In an attempt to further manage labor costs, businesses are taking action. They are asking their existing employees to pay their taxes.

And then attempt to further manage labor costs businesses are taking action.

They are asking their existing employees to do more.

Derrek Gafford: As we believe, this provides investors with more useful insight. For your convenience, we have provided a reconciliation of US gap net income to adjusted net income and adjusted net income per diluted share using this approach for all prior quarters and years back to 2021 on the financial results page under the Investor Relations section of our website. Any comparisons made today are based on a comparison to the same period in the prior year unless otherwise David.

Speaker 2: They're also being more selective on the roles they choose to fill and more judicious in their use of human capital provider.

They are also being more selective on the roles I choose to fill and more judicious in their use of human capital providers.

Speaker 2: These factors coupled with uncertainty about the trajectory of their future workforce needs are some of the underlying factors impacting our demand, as well as the demand for the broader staffing market in the U.S.

These factors coupled with uncertainty about the trajectory of their future workforce needs or some of the underlying factors impacting our demand as well as the demand for the broader staffing market in the U S.

Total revenue for the quarter was down 18%.

Speaker 2: Revenue growth for the quarter came in four points short of our midpoint expectation, driven by softer than expected trends in August and the first half of September .

Revenue growth for the quarter came in four points short of our midpoint expectation driven by softer than expected trends in August and the first half of September .

Speaker 2: Looking at the second half of September and into October , we are encouraged to see that the weekly sequential revenue trends for the staffing side of our business are in line with it.

Looking at the second half of September and into October we are encouraged to see that the weekly sequential revenue trends for the staffing side of our business.

In line with historical patterns.

From a net income and loss perspective, our results were roughly breakeven this quarter.

Speaker 2: From a net income and loss perspective, our results will roughly break even this quarter.

Operator: 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 in audio replay will also be available soon after the call.

Taryn Owen: Okay, let's now turn the call over to Teri.

Speaker 2: down from that income of $21 million in Q3 last year.

Down from net income of $21 million in Q3 last year.

Taryn Owen: Thank you, Derek, and welcome everyone to today's call. We appreciate you being with us. Revenue for the quarter was 473 million down 18% compared to the prior year. Our results are reflective of the challenging environment in staffing and recruiting. Across most true blue verticals and geographies, our clients remain conscious and selective about the temporary and full-time positions they choose to fill. Our teams are staying highly engaged to help our clients navigate this uncertainty and to ensure we are poised to support them when they're staffing these expands.

Speaker 2: Included in our results for the quarter are $2 million of costs associated with our CEO transition. The total grossed net income was $5 million.

Included in our results for the quarter or $2 million of costs associated with our CEO transition.

Yeah.

Adjusted net income was $5 million.

Down from $24 million last year.

Speaker 2: while adjusted EBITDA declined to $10 million versus $35 million last year.

While adjusted EBITDA declined to $10 million versus $35 million last year.

Speaker 2: Gross margin of 26.2% was down 90 basis points.

Gross margin of 26, 2% was down 90 basis points.

Speaker 2: This was driven by a revenue mix increase in PeopleReady's renewable energy business, which carries a lower gross margin than the blended business due to the pass-through travel costs associated with the business.

This was driven by a revenue mix increase in people ready as renewable energy business, which carries a lower gross margin than our blended business due to the pass through travel costs associated with the business.

Taryn Owen: We are being proactive with our sales approach by leveraging our playbooks and centralized teams to capitalize on every opportunity, and we have a particular focus on high-growth verticals and under-penetrated geographies nationwide. Additionally, we are pursuing shorter-term projects and offering flexible solutions to clients in order to meet immediate needs while positioning us for future expansion opportunities. Along with our current focus, we remain highly committed to our longer-term strategic priorities, including advancing our digital capabilities to position us to gain market share.

Speaker 2: as well as a decline in the revenue mix of our highest margin business, PeopleScout.

As well as the decline in the revenue and mix of our highest margin business people scale.

Speaker 2: Workers' compensation as a percentage of revenue was higher due to less favorable development and prior period reserves than we received last year.

Workers' compensation as a percentage of revenue was higher due to less favorable development and prior period reserves than we received last year.

Speaker 2: These factors were partially offset by disciplined pricing in our people ready business.

These factors were partially offset by disciplined pricing and our people ready business.

Speaker 2: which delivered its 10th consecutive quarter of positive spread between bill rate and pay rate inflation.

Which delivered its 10th consecutive quarter of positive spread between bill rate and pay rate inflation.

Taryn Owen: For instance, we are enhancing our job stack and ethnic platforms to drive greater efficiency and improve the client, associate, and candidate experience. We are also committed to expanding both our scope and our footprint. For example, within staffing, we are focused on high-growth sectors such as renewable and skilled labor placements. Within our PO, we are focused on high-growth verticals such as healthcare, as well as diversifying into higher skilled placements and more specialized product offerings.

Speaker 2: SG&A decreased 3% for the quarter. Adjusted SG&A decreased 5%, which we believe will also be the case for Q4 this year, excluding the impact of the extra week associated with our 53-week fiscal year.

SG&A decreased 3% for the quarter adjusted SG&A decreased 5%, which we believe will also be the case for Q4 of this year.

Including the impact of the extra week associated with our 53 week fiscal year.

We remain focused on managing costs to enhance our profitability.

Speaker 2: We remain focused on managing costs to enhance our profitability.

Speaker 2: while maintaining our operational strengths and readiness to increase our market share when demand rebounds.

While maintaining our operational strengths and readiness to increase our market share when demand rebounds.

Speaker 2: We recognize an income tax benefit of $2 million this quarter due to the favorable impact of job tax credits.

We recognized an income tax benefit of $2 million this quarter due to the favorable impact of job tax credits.

Taryn Owen: Gaining market share and under-penetrated geographies is also a focus across our driver, skilled trades, and our PO businesses. While industry demands is currently subdued, the long-term outlook for staffing remains positive, and we are well positioned to capitalize. We have deep expertise in staffing in our PO, a strong footprint, leading technology, and significant resources. Our team is incredibly talented and committed, our values are strong, and we have a compelling mission. True Blue provides a vital service, and we remain ready to serve our clients immediate and future needs.

Now, let's turn to the specific results of our segments.

Speaker 2: People ready revenue decreased 15% while segment profit decreased 66% and segment profit margin was down 520 basis.

People already revenue decreased 15% while segment profit decreased 66% and segment profit margin was down 520 basis points.

The retail transportation and service industry has continued to be our most challenging verticals.

Speaker 2: The retail, transportation, and service industries continue to be our most challenging verticals.

Speaker 2: while our renewable energy business continues to have solid growth.

While our renewable energy business continues to have solid growth.

Speaker 2: We are also seeing greater resilience in our small to medium sized customers compared to larger national accounts.

We are also seeing greater resiliency in our small to medium sized customers compared to larger national accounts.

Speaker 2: Being disciplined with our pricing is an important priority to help cover the inflationary pressures in our SG&A expense.

Being disciplined with our pricing is an important priority to help cover the inflationary pressures in our SG&A expense.

Taryn Owen: Before I turn it over to Derek for further discussion on our results, I want to take a moment to thank him for his leadership and numerous contributions to True Blue during his more than two decades with our company. He has built a digital and people-first finance organization with a deep talent bench that will continue to serve us well, and our entire organization is grateful for his contributions. Thank you, Derek. I'll pass the call over to you now.

Speaker 2: The business produced another quarter of positive spread between bill and pay rate inflation with bill rates up 6.9% and pay...

The business produced another quarter of positive spread between bill and pay rate inflation.

With bill rates up six 9%.

And pay rates up six 1%.

Speaker 2: People Scout Remnue decreased 32% while Segment Profit decreased 41% and Segment Profit margin was down 200 basis points.

People Scott revenue decreased 32%.

While segment profit decreased 41% and segment profit margin was down 200 basis points.

Derrek Gafford: Thank you, Teran. Demand for our services continues to be soft as businesses of all sorts face a tough balancing act. On one hand, labor pools remain tight, and businesses recognize how critical retaining talent is in today's environment. On the other hand, businesses have seen significant increases in pay rates, particularly with positions at the lower end of the pay scale. In an attempt to further manage labor costs, businesses are taking action. They are asking their existing employees to do more.

Speaker 2: We would characterize the RPO demand environment as soft, with clients continuing to be selective with the roles they choose to fill, some initiating or continuing hiring freezes, and others attempt to

We would characterize the RPM demand environment is soft.

Clients continuing to be selective with the roles I choose to fill.

Some initiating or continuing hiring freezes.

And others attempting to use internal resources to fill jobs.

Also playing into this our employee quit rates in the United States.

Speaker 2: Also playing into this are employee quit rates in the United States.

Speaker 2: Quit rates have consistently drifted lower throughout 2023 as more employees choose to remain in their current jobs, resulting in less employee churn.

Quit rates have consistently drifted lower throughout 2023 as more employees choose to remain in their current jobs.

<unk> and less employee churn for our customers.

Speaker 2: Despite the margin contraction, the People Scout business produced a healthy segment profit margin of 12%.

Despite the margin contraction the people scout business produced a healthy segment profit margin of 12%.

Derrek Gafford: They're also being more selective on the roles they choose to fill and more judicious in their use of human capital providers. These factors coupled with uncertainty about the trajectory of their future workforce needs are some of the underlying factors impacting our demand, as well as the demand for the broader staffing market in the U.S. Total revenue for the quarter was down 18%. Revenue growth for the quarter came in four points short of our midpoint expectation, driven by softer than expected trends in August and the first half of September.

Speaker 2: People management revenue decreased 16% while segment profit decreased 52% and segment profit margin was down 110 basis points.

People management revenue decreased 16%, while segment profit decreased 52% and segment profit margin was down 110 basis points.

Now, let's turn to the balance sheet.

Speaker 2: Our balance sheet is in good shape. We finished the quarter with no debt, $47 million in cash, and over $120 million of borrowing availability.

Our balance sheet is in good shape, we finished the quarter with no debt $47 million in cash and over $120 million of borrowing availability.

Speaker 2: Before we wrap up, I'd like to take a moment to provide additional color on a couple forward-looking items.

Before we wrap up I'd like to take a moment to provide additional color on a couple of forward looking items.

Speaker 2: First, similar to 2016, I want to remind everyone that our fiscal fourth quarter this year will include a 14th week.

First similar to 2016, I want to remind everyone that our fiscal fourth quarter. This year will include a 14th week.

Derrek Gafford: Looking at the second half of September and into October, we are encouraged to see that the weekly sequential revenue trends for the staffing side of our business are in line with historical patterns. From a net income and loss perspective, our results were roughly breakeven this quarter, down from net income of 21 million and Q3 last year, including our results for the quarter or two million of costs associated with our CEO transition.

Speaker 2: which is expected to add incremental revenue of $17 to $22 million, and a slight headwind on profit due to the low seasonal volume.

Which is expected to add incremental revenue of 17% to $22 million and a slight headwind on profit due to the low seasonal volume.

Speaker 2: Second, we expect a revenue decline of 19 to 15% on a comparable 13 week basis.

Okay.

Second we expect a revenue decline of 19% to 15% on a comparable 13 week basis.

Speaker 2: While we are encouraged by the fact that the most recent weekly revenue trends on the staffing side of our business have followed historical expectations, it's too soon to tell whether the trend has staying power.

While we are encouraged by the fact that the most recent weekly revenue trends on the staffing side of our business has followed historical expectations.

Derrek Gafford: Adjust the net income was five million, down from 24 million last year, while adjusted EBITDA to $10 million versus 35 million last year. Gross margin of 26.2% was down 90 basis points. This was driven by a revenue mix increase in people ready's renewable energy business, which carries a lower gross margin than the blended business due to the pass-through travel costs associated with the business. As well as a decline in the revenue mix of our highest margin business, people scout.

It's too soon to tell whether the trend has staying power.

Yeah.

Speaker 2: For additional details on our outlook, please see our earnings presentation posted to our website today.

For additional details on our outlook. Please see our earnings presentation posted to our website today.

Speaker 2: As we think about planning for 2024, it comes down to staying disciplined.

As we think about planning for 2024, it comes down to staying disciplined.

Speaker 2: We have been focused with our pricing and cost management actions while preserving our operational strengths, and we plan to continue this course in 2024.

We have been focused with our pricing and cost management actions, while preserving our operational strengths and.

And we plan to continue this course in 2024.

Speaker 2: We're also prepared to take additional cost management actions should the operating environment become more challenging.

We're also prepared to take additional cost management actions should the operating environment become more challenging.

Derrek Gafford: Workers' compensation as a percentage of revenue was higher due to less favorable development and prior period reserves than we received last year. These factors were partially offset by discipline pricing in our people ready business, which delivered its 10th consecutive quarter of positive spread between bill rate and pay rate inflation. SNA decreased 3% for the quarter, adjusted at SNA decreased 5%, which we believe will also be the case for Q4 this year, including the impact of the extra week associated with our 53 week fiscal year.

Now on a personal note.

Speaker 2: While this will be my last month as CFO , I will be staying on through the end of this year as an advisor to help ensure a smooth transition.

While this will be my last month as CFO I will be staying on through the end of this year as an advisor to help ensure a smooth transition.

Speaker 2: It has been a pleasure to serve our employees, our customers, and the investment community over my 20 year tenure.

It has been a pleasure to serve our employees our customers and the investment community over my 20 year tenure here.

Speaker 2: Okay, this concludes our prepared remarks. Operator, please open the call now for questions.

Okay. This concludes our prepared remarks operator please.

Please open the call now for questions.

Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question.

Thank you we will now be conducting a question and answer session. 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.

Derrek Gafford: We remain focused on managing costs to enhance our profitability, while maintaining our operational strengths and readiness to increase our market share when demand rebounds. We recognize an income tax benefit of $2 million this quarter due to the favorable impact of job tax credits.

Speaker 1: You may press star 2 if you would like to remove your question from the chat.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please.

Derrek Gafford: Now let's turn to the specific results of our segments. People ready revenue decreased 15% while segment profit decreased 66% and segment profit margin was down 520 basis points. The retail, transportation, and service industries continue to be our most challenging verticals, while our renewable energy business continues to have solid growth. We are also seeing greater resilience in our small to medium sized customers compared to larger national accounts. Being disciplined with our pricing is an important priority to help cover the inflationary pressures in our SNA expense.

Yeah.

Speaker 1: Thank you. Our first question comes from Jeff Silber with BMO Capital Markets. Please proceed with your questions.

Thank you. Our first question comes from Jeff Silber with BMO capital markets. Please proceed with your question.

Okay.

Speaker 4: Thanks so much. And before I start, Derek, I just wanted to wish you the best of luck. And thank you for all your help over the past 20 years or so. Wow, it's been a long time. I know there's somewhat of a lack of visibility in your space. But the last couple quarters seem to have been especially tough in terms of the guidance. Is there anything different going on in the business or the competitive environment that's making it more difficult to provide this guidance?

Thanks, so much and before I start Derek I just wanted to wish you. The best of luck and thank you for all your help over the past 20 years or so it's been okay.

I know, there's somewhat of a lack of visibility in your space, but the last couple of quarters seem to have been especially tough in terms of the guidance is there anything different going on in the business or the competitive environment that is making it more difficult to provide this guidance.

Derrek Gafford: The business produced another quarter of positive spread between bill and pay rate inflation, with bill rates up 6.9%, and pay rates up 6.1%. People scout revenue decreased 32%, while segment profit decreased 41%, and segment profit margin was down 200 basis points.

Speaker 2: I don't think so, Jeff. The way we take a look at the guidance...

I don't think so Jeff the way, we take a look at the guidance as you've noted the visibility in our industry and particularly with some of our staffing brands and our niches are even less visible than many parts of the staffing market. So the way that we're taking a look at things as we take a look at the trend.

Speaker 2: As you've noted, the visibility in our industry, and particularly with some of our staffing brands and our niches, are even less visible than many parts of the staffing market. So the way that we're taking a look at things is we take a look at the trends that we see coming in to setting the guidance into right here before the conference call. And we just kind of really call the shot on how things are trending.

Derrek Gafford: We would characterize the RPO demand environment as soft, with clients continuing to be selective with the roles they choose to fill, some initiating or continuing hiring freezes, and others attempting to use internal resources to fill jobs. Also playing into this are employee quit rates in the United States. Quit rates have consistently drifted lower throughout 2023, as more employees choose to remain in their current jobs, resulting in less employee churn for our customers. Despite the margin contraction, the people scout business produced a healthy segment profit margin, 12%. People management revenue decreased 16%, while segment profit decreased 52%, and segment profit margin was down 110 basis points.

<unk> that we see coming in to setting the guidance into right before the conference call and we just kind of really call. The shot on how things are trending.

Speaker 2: We don't try to build in something extra that might turn up or something that might turn down unless we've got a reasonable probability of something that's kind of on our mind or we're seeing a little sign tick up. And so what we really saw this...

We don't try to build in something extra that might turn up or something that might turn down unless we got a reasonable probability of something that's kind of on our minor we're seeing a little sign tick up.

And so what we really saw this this quarter.

Speaker 2: was, you know, July came out just about like we thought. And then as we went into August , things really kind of took a step down.

Was <unk>.

July came out just about like we thought and then as we went into August things really kind of took a step down.

Speaker 2: particularly in people ready, also at people scout, people management pretty much hung in there.

Particularly in people already also let people scout people management pretty much hung in there.

Speaker 2: And so what we saw were the retail industry.

And so what we saw or the retail industry.

Derrek Gafford: Now let's turn to the balance sheet. Our balance sheet is in good shape. We've finished the quarter with no debt, 47 million in cash, and over 120 million of borrowing availability.

Speaker 2: the transportation industry and to a lesser extent the manufacturing industry vertical as we came into August all

The transportation industry and to a lesser extent the manufacturing industry vertical as we came into August all three of those.

Speaker 2: actually didn't live up to what we would normally see from a sequential step up perspective. That's really what threw us off the mark. We didn't see that one coming. That continued a bit into September . Then we really saw things rally back at the end of September . Matter of fact, as we went into September , all of those verticals that I talked about that took a step down actually took a step forward above their sequential...

Actually didn't live up to what we would normally see from a sequential step up perspective, that's really what threw us off the mark and we did see that one coming that continued a bit into September and then we really saw things kind of rally back at the end of September a matter of fact, as we went into September all of those verticals that I talk.

Derrek Gafford: Before we wrap up, I'd like to take a moment to provide additional color on a couple forward-looking items. First, similar to 2016, I want to remind everyone that our fiscal fourth quarter this year will include a 14th week, which is expected to add incremental revenue of 17 to 22 million, and a slight headwind on profit due to the low seasonal volume. Second, we expect a revenue decline of 19 to 15% on a comparable 13-week basis, while we encourage by the fact that the most recent weekly revenue trends on the staffing side of our business have followed historical expectations, it's too soon to tell whether the trend has staying power. For additional details on our outlook, please see our earnings presentation posted to our website today.

About that that took a step down actually took a step forward above their sequential.

Speaker 2: revenue run rate with exception of retail. We had a couple of other industries that bounced back nicely as well.

Revenue run rate with exception of retail we had a couple of other industries that bounce back nicely as well.

Going into.

Speaker 2: Into October , you know, we look back the last 5 weeks for our staffing businesses. Everything's been right in line. With historical sequential trends, and as we set the guidance and the outlook for this quarter that we're going into the 4th quarter. We have made the assumption that that's going to continue.

Into October we look back the last five weeks for our staffing business as everything has been right in line with historical sequential trends and as we set the guidance and the outlook for this quarter that we're going into the fourth quarter. We have made the assumption that thats going to continue.

Speaker 4: Okay, that's helpful. A few times in the prepared remarks, you talked about cost management. Can we get a little bit more color in terms of where you think that cost management will be coming? Well, sure. Well, let's talk about what...

Okay.

Helpful. A few times in the prepared remarks, you talked about cost management can we get a little bit more color.

Derrek Gafford: As we think about planning for 2024, it comes down to staying disciplined. We have been focused with our pricing and cost management actions, while preserving our operational strengths, and we plan to continue this course in 2024. We're also prepared to take additional cost management actions, should the operating environment become more challenging.

In terms of where you think that cost management will be coming.

Well sure well, let's talk about what we've done so far this year.

Speaker 2: And so I'm going to talk about where our cost actions have been this year in comparison with what our budget was coming into the year, which would have been really our outlook that we first shared with you for the year. When we talked to you in February this year, we've cut out about 35M.

And so I'm going to talk about where our cost actions have been this year.

In comparison with what our budget was coming into the year, which would have been really our outlook that we first shared with you for the year. When we talked to you in February this year, we've cut out about $35 million of costs.

Derrek Gafford: Now, on a personal note, while this will be my last month as CFO, I will be staying on through the end of this year as an advisor to help ensure a smooth transition. It has been a pleasure to serve our employees, our customers, and the investment community over my 20-year tenure here. Okay, this concludes our prepared remarks, operator. Please open the call now for questions. Thank you.

Speaker 2: Not all of those costs are running through SG&A though. A fair amount of those are running through cost of sales. In fact, we're down about 1,200 people this year from where we first started. About three-fourths of those in the People Scout brand. Now keep in mind, when I say some of these costs are running through cost of sales because if they're recruiting actions, that's a cost of sale item for us. That's where we book at People Scout, not down the SG&A.

Uh huh.

Not all of those costs are running through SG&A, though a fair amount of those are running through cost of sales. In fact, we're down about 200 people. This year from where we first started about three fourths of those and the people scale brand and keep in mind when I say some of these costs are running through cost of sales because of the recruiting.

Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press the R1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press R2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start.

<unk>, that's a cost of sale items for us that's where we book it at people Scout knocked down the SG&A line.

Speaker 2: So you're not seeing some of those and then, you know, we've had about $10 million of what we would consider unique costs related to the severance and the workforce restructuring actions that we've taken. We also had some CEO transition costs that have negated those. But once we get past those, those are all built into our run rate. We've also had some things with medical inflation that have worked against us, so you're not seeing all of it.

So youre not seeing some of those and then you know.

We've had about $10 million of what we would consider unique costs related to.

The severance and the workforce restructuring actions that we've taken and we also had some CEO transition costs of have indicated those but.

Operator: Keith. One moment please while we pull for questions. Thank you.

Once we get pass those those are all built into our run rate, but also have some some things with medical inflation that have worked against us so youre not seeing all of it.

Speaker 2: But those are the cost actions that we've taken so far this year.

But those are the cost actions that we've taken so far this year.

Speaker 2: As we look forward to 2024, as I alluded to in the prepared remarks, the company's really preparing for it to be a really disciplined planning exercise. And what I mean by that is... Gettingames

As we look forward to 2024 as I alluded to in the prepared remarks, the companies really preparing for it to be.

Jeff Silber: Our first question comes from Jeff Silber with BMO Capital, Markets. Please proceed with your questions. Thanks to the best of luck, and thank you for all your help over the past 20 years or so. I know there's somewhat of a lack of visibility in your space, but the last couple quarters seem to have been especially tough in terms of the guidance. Is there anything different going on in the business or the competitive environment that's making it more difficult to provide this guidance?

A really disciplined planning exercise and what I mean by that is.

Speaker 2: You know, there's probably a 50% chance that things get better next year for this industry. Maybe there's a 50% chance things get worse. Hard to say.

There's probably a 50% chance that things get better next year for this industry, maybe there's a 50% chance things get worse hard to say.

Speaker 2: With those kind of odds though, it just plans to stay really disciplined and focused on the downside plans so they're harder to pull together to what the company is doing. We think there could be some more...

With those kind of odds, though it just plans to stay really disciplined and focus on the downside plans are harder to pull together so what the company is doing.

There can be some more.

Speaker 2: gains made and some of the basics on cost management like I just recap for you that we did in 2023 and also some things in lowering the service delivery costs for the company. Some through centralization, some through some process and some technology actions.

Gains made in some of the basics on cost management like I just recap for you that we did in 2023 and and also some things and lowering the service delivery costs for the company some through centralization some through some process and some technology actions the.

Jeff Silber: I don't think so, Jeff. The way we take a look at the guidance, as you have noted, the visibility in our industry, and particularly with some of our staffing brands and our niches are even less visible than many parts of the staffing market. So the way that we're taking a look at things is, we take a look at the trends that we see coming in to setting the guidance into right before conference call, and we just kind of really call the shot on how things are trending.

Speaker 2: The company will be able to give you more color on those specifics, though, after we finish our planning for 2024 and come into talking to you about the fourth quarter results in February .

The company will be able to give you more color on those specifics, though as we after we finish our planning for 2024 and come into talking to you about the fourth quarter results in February .

Speaker 4: All right, great. If I could just speak in one more follow up question. I just want to just clarify the guidance.

Alright, great if I could just sneak in one more follow up question.

Just wanted to just clarify.

Clarify the guidance.

Speaker 2: So, the 450 to 475 million is on a 13 week basis, but since there is a 14th week in the quarter, we need to add 17 to 22 million on top of that to get the 467 to 499. Is that correct? Yeah, that's exactly right. And so, we think it's the easiest to...

So the $4 $50 million to $475 million and on a 13 week basis, but since there is a 14th week in the quarter, we need to add 17% to $22 million on top of that to get to $4 67 to $4 99 is that correct.

Jeff Silber: We don't try to build in something extra that might turn up or something that might turn down, unless we've got a reasonable probability of something that's kind of on our mind or we're seeing a little sign tick up.

Derrek Gafford: And so what we really saw this quarter was, you know, July came out just about like we thought, and then as we went into August, things really kind of took a step down. Particularly in people ready, also people scout, people management pretty much hung in there. And so what we saw were the retail industry, the transportation industry, and to a lesser extent the manufacturing industry vertical, as we came into August, all three of those actually didn't live up to what we would normally see from a sequential step up perspective.

Yes, that's exactly right and so.

We think it's the easiest.

We don't like these 53 week years anymore than all of you do.

Speaker 2: We don't like these 53 week years any more than all of you do, but we think that with some, we've had some practice over time, we think the easiest way is to provide things on a 13 week basis and we'll kind of give it to you both ways so that it's more comparable to our other results.

We think that with some we've had some practice over time, we think the easiest way is to provide things on a 13 week basis, and what kind of give it to you both ways. So that it's more comparable to our other results, but from a GAAP perspective, you need to do exactly what you just mentioned, adding that 14th week to revenue don't add.

Speaker 2: But from a GAAP perspective, you need to do exactly what you just mentioned. Add in that 14th week to revenue. Don't add anything else on the bottom line. It's a real low seasonal quarter. If anything, it's slightly decorative to the quarter and the year.

Anything else on the bottom line, it's a real low seasonal quarter. Its if anything it's slightly decreased to the quarter and the year.

Derrek Gafford: That's really what threw us off the mark. And we didn't see that one coming. That continued a bit into September. And then we really saw things kind of rally back at the end of September. Matter of fact, as we went into September, all of those verticals that I talked about that took a step down actually took a step forward above their sequential revenue run rate with exception of retail. We had a couple of other industries that bounced back nicely as well.

Got it okay. Thanks again.

Speaker 1: Thank you. Our next question comes from the line of Kartik Mehta with North Coast Research. Please proceed with your question.

Thank you. Our next question comes from the line of Kartik Mehta with Northcoast Research. Please proceed with your question.

Speaker 5: Thank you. Derek, I know you, maybe you already mentioned this and if you did, I apologize, but you talked about latter part of September kind of firming up. I'm wondering the first few weeks of October , if you saw those trends continue or if you saw anything different than what you might have anticipated.

Thank you.

Eric.

I know you maybe you already mentioned this and if you did I apologize, but you talked about <unk>.

Later part of September kind of firming up I'm wondering.

The first few weeks of October if you saw those trends continue or if you saw anything different than what you might have anticipated.

Derrek Gafford: And so going into October, you know, we looked back the last five weeks for our staffing businesses. Everything's been right online with historical sequential trends. And as we set the guidance and the outlook for this quarter that we're going into the fourth quarter, we have made the assumption that that's going to continue. Okay, that's that's helpful.

Speaker 2: Yeah, so let's talk about things from a year-over-year perspective and then talk to you about run rates, how things are looking. So, and we might as well just talk about what the trends were for the quarter, because sometimes that's on people's minds. So, for the quarter, revenue was down 18%. Every month during the quarter was right around 18%. So, very steady from a year-over-year decline perspective. As we come through the first three weeks...

Yeah, So let's talk about things on a from a year over year perspective, and then talk to you about run rates, how things are looking so and we might as well just talk about what the trends were for the quarter because sometimes that's on People's minds. So for the quarter revenue was down 18%.

Derrek Gafford: A few times in the prepared remarks you talked about cost management. Can we get a little bit more color in terms of where you think that cost management will be coming. Well, sure.

Every month during the quarter was right around 18%, so very steady from a year over year decline perspective.

As we come through the first three weeks of October .

Speaker 2: the revenue decline. Now this is for our staffing businesses. We only bill our PO, the People's Scout business monthly and provide those metrics on a monthly basis. But for our staffing businesses, for the first three weeks we were down 14% year over year. Now...

The revenue decline this is for our staffing businesses.

Derrek Gafford: Well, let's talk about what we've done so far this year. And so I'm going to talk about where our cost actions have been this year in comparison with what our budget was coming into the year, which would have been really our outlook that we first shared with you for the year when we talked to you in February this year. We're down to those are running through costs of sales. In fact, we're down about 1,200 people this year from where we first started, about three-fourths of those and the people scalp ran.

We only bill our appeal to people scale business monthly and provide those metrics on a monthly basis, but for our staffing businesses.

For the first three weeks, we were down 14% year over year now.

Speaker 2: If we take a look through the middle of September through the third week of October from a sequential perspective, run rate perspective, in our staffing businesses, all of those were ramping up as we would expect with historical standards. So you saw in some of our prepared remarks in our press release that we've...

If we take a look through the middle of September through the third week of October from a sequential perspective run rate perspective in our staffing businesses all of those were ramping up.

We would expect with historical standards. So you you saw in some of our prepared remarks.

<unk> in our press release that we have.

Speaker 2: potential signs of stabilization, that's really what we're referring to. So we're encouraged by that, we're not banking on it, but we're encouraged by it. And that's kind of the latest from the most recent trend perspective that we can share with you.

Since the potential signs of stabilization, that's really what we're referring to so we're encouraged by that we're not banking on it but we're encouraged by it.

Derrek Gafford: I keep in mind what I say, some of these costs are running through costs of sales because if they're recruiting actions, that's a cost of sale item for us. That's where we book it at people scalp, not down the SGNA line. So you're not seeing some of those. And then, you know, we've had about $10 million of what we would consider unique costs related to the severance and the workforce restructuring actions that we've taken.

And that's kind of the latest from the most recent trend perspective that we can share with you.

Speaker 5: And I know you mentioned some of this already, but curious on demand, demand by end market. And you already talked about a few where things are, weren't progressing. But then you also said you had a couple where things were going well. So just thoughts on the end market.

And I know you mentioned some of this already but curious on demand.

By end market I know you already talked about a few where things are or arent progressing. But then you also said you had a couple of where things were going well. So just thoughts on the end market.

Derrek Gafford: We also had some CEO transition costs that have negated those. But once we get past those, those are all built into our run rate. We also had some things with medical inflation that have worked against us, so you're not seeing all of it. But those are the cost actions that we've taken so far this year.

Speaker 2: Well, yeah, a question had come up, I believe Jeff had asked it, kind of asking about guidance and kind of what had happened in the quarter. And so that was the explanation of that.

Well, yes.

A question to come up I believe Jeff had asked it kind of.

Asking about guidance and kind of what it happened in the quarter and so that was the explanation of that and so.

Derrek Gafford: As we look forward to 2024, as alluded to in the prepared remarks, the company's really preparing for it to be a really disciplined planning exercise. And what I mean by that is, you know, there's probably a 50% chance that things get better next year for this industry. Maybe there's a 50% chance things get worse, hard to say. With those kind of odds, though, it just plans to say really disciplined and focus on the downside plans, those are harder to pull together.

Speaker 2: I think the main takeaway is what we've seen in the stabilization of our trends from a sequential perspective. Really all of those are looking good with the exception of retail.

I think the main takeaway is what we've seen in the stabilization of our trends from a sequential perspective really all of those are looking good with the exception of retail.

Speaker 2: We've actually got some that are performed a little better than we expected. Most kind of at expectation. The one call out if we wanted to go on the negative side would be retail. That one continues to weaken. But we've got some others that are strengthening and hence overall really the sequential trends are right in line with historical average.

We've actually got some that are performed a little better than we expected most kind of at expectation in the one call out if we wanted to to go on the on the negative side would be retail that one continues to weaken.

Derrek Gafford: That's what the company's doing. We think there could be some more gains made in some of the basics on cost management, like I just recap for you that we did in 2023. And also some things in lowering the service delivery costs for the company, some through centralization, some through some process and some technology actions.

But we've got some others that are strengthening and enhance overall really the sequential trends are.

Right all right in line with historical averages.

Speaker 5: Perfect. Just one last question. You know, as you look at your segments, and you talked a little bit about the staffing business being down about 14%, just expectations of the other two businesses, you know, as you look at the segments.

Perfect.

Just one last question you know as you look at your segments and you talked a little bit about the staffing business being down about 14%.

Expectations of the other two businesses.

Derrek Gafford: The company will be able to give you more color on those specifics, though, as we after we finish our planning for 2024 and come into talking to you about the fourth quarter results in February. All right, great.

As you.

Look.

At the segments.

Speaker 2: Yeah, well if we're talking about the fourth quarter, I'm just going to go off midpoints. We've given ranges, but to quote less numbers, I'm just going to give you midpoints. The midpoint of our outlook for the fourth quarter is for the company to be down about 17%.

Yeah, well, if we're talking about the fourth quarter I'm, just going to go off mid points, we've given ranges, but to quote less numbers I'm just going to give you a mid point it's okay. So.

Derrek Gafford: If I could just sneak in one more follow-up question. I just want to just clarify the guidance. So the 450 to 475 million is on a 13 week basis, but since there is a 14th week in the quarter, we need to add 17 to 22 million on top of that to get the 467 to 499. Is that correct? Yeah, that's exactly right. And so we think it's the easiest. We don't like these 53 week years anymore than all of you do, but we think that with some we've had some practice over time.

Derrek Gafford: We think the easiest way is to provide things on a 13 week basis, and we'll kind of give it to you both ways so that it's more comparable to our other results. But from a gap perspective, you need to do exactly what you just mentioned. Add in that 14th week to revenue. Don't add anything else on the bottom line. It's a real low seasonal quarter. If anything, it's slightly decreative to the quarter.

The midpoint of our outlook for the fourth quarter is for the company to be down about 17% that's.

Jeff Silber: Thank you.

Speaker 2: That's 15% for our two staffing segments, people management, people ready, and about 30% for our RPO business at People Scout.

That's 15% for our two staffing segments people management people ready and about 30% for our RPM business people scale.

Perfect. Thank you so much Eric I really appreciate it.

Speaker 1: Thank you. Our next question comes from the line of Mark Riddick with Sdodi. Please proceed with your question.

Thank you. Our next question comes from the line of Marc Riddick with Sidoti. Please proceed with your question.

Yes.

Hi, good evening everyone.

Hey.

Speaker 6: Just wanted to first thank you for everything and all of your assistance, Derek, over the years. It's been a pleasure, you know.

Just wanted to first thank you for everything and all of your assistance Derek over the years and certainly looking forward to you know are moving.

Speaker 6: moving forward and hope all goes well that you're looking for there. I did want to just sort of touch a little bit on revenue mix that you touched on in prepared remarks. Maybe you could shed a little more light on the renewables commentary and the sort of the past to affect and how that sort of plays into the revenue mix impact. And then I have a quick follow up on cash flow.

Moving moving forward and hope all goes well.

Youre looking for there and I did want to you know.

Sort of touch a little bit on revenue mix that you touched on it in prepared remarks, maybe you could shed a little more light on the renewables common.

Kartik Mehta: Our next question comes from the line of Kartik Mehta with North Coast Research. Please proceed with your question. Thank you. Derrek, I know you, maybe you already mentioned this, and if you did, I apologize, but you talked about latter part of September kind of firming up. I'm wondering, the first few weeks of October, if you saw those trends continue, or if you saw anything different than what you might have anticipated? Yeah, so let's talk about things on it from a year-over-year perspective, and then talk to you about run rates, how things are looking.

Commentary.

The sort of the pass through effect and how that sort of plays into the revenue mix impact and then I have a quick follow up on cash flow.

Speaker 2: Yeah, well, when we're talking about the renewable space, that has been a bright spot for us.

Okay.

Yeah, well when we're talking about the renewable space.

That has been a bright spot for us and.

And so if we're talking on a year over year basis.

Speaker 2: Renewable energy for us was up about 80%.

Renewable energy for us was up about 80%.

Speaker 2: And so that's continuing to be a really strong dynamic for us, not just on a year-over-year basis, but each...

And so that's continuing to be a really strong dynamic for us not just on a year over year basis, but each.

Speaker 2: quarter sequentially we've been building some run rate there. So our renewable energy for the third quarter was about 40 million in total.

Derrek Gafford: And we might as well just talk about what the trends were for the quarter, because sometimes that's on people's minds. So for the quarter revenue was down 18%, every month during the quarter was right around 18%, so very steady from a year-over-year decline perspective. As we come through the first three weeks of October, the revenue decline. Now, this is for our staffing businesses. We only bill our PO, the People Scout Business Monthly, and provide those metrics on a monthly basis, but for our staffing businesses, for the first three weeks, we were down 14% year-over-year.

Quarter sequentially, we've been building some run rate there so our renewable energy for the.

The third quarter was about 40 million in total.

Okay.

Speaker 6: Okay, that's definitely helpful. It seemed as though it would have to be a nice game there to have the mixed impact there. I was wondering then if we could sort of follow up on cash flow and cash usage prioritization. I know certainly that having a clean balance sheet and challenging...

Okay. That's definitely helpful. It seems as though that it would have to be at a nice gain there.

The mix impact I was wondering if we could just sort of follow up on cash.

Cash.

Cash flow and cash usage prioritization I know certainly that you know the.

Having a clean balance sheet and challenging.

Derrek Gafford: Now, if we take a look through the middle of September through the third week of October, from a sequential perspective, run rate perspective in our staffing businesses, all of those were ramping up as we would expect with historical standards. So you saw in some of our prepared remarks in our press release that we've seen potential signs of stabilization. That's really what we're referring to. So we're encouraged by that. We're not banking on it, but we're encouraged by it. And that's kind of the latest from the most recent trend perspective that we can share with you.

Speaker 6: Demand times are certainly very advantageous. Is there anything that we should be thinking about as far as internal investments that are on the horizon for the digital capabilities? Or is there anything lumpy that we should be thinking about as far as any potential needs in the coming quarter?

Demand times, and certainly very advantageous is there anything that we should be thinking about as far as internal investments that are on the horizon for the digital capabilities or is there anything lumpy that we should be thinking about as far as any any potential needs in the coming quarters.

Speaker 2: No, nothing really lumpy out there. You know, from a cash flow perspective and a use of capital perspective, investing back in the business, that has been our priority, both from an operating expense perspective, use of capital as well as...

No nothing really lumpy out there.

From a cash flow perspective, and our use of capital perspective investing back in the business that has been our priority.

Both from an operating expense perspective use of capital as well as.

Derrek Gafford: And I know you mentioned some of this already, but curiously, demand by end market. I knew you already talked about a few where things weren't progressing, but then you also said you had a couple where things were going well, so just thoughts on the end market. Well, yeah, a question to come up, I believe Jeff had asked it kind of, you know, asking about guidance and kind of what had happened in the quarter.

Speaker 2: from a CapEx perspective, largely in technology. So the company is still very focused on digitally transforming the business.

From a capex perspective, largely in technology so.

The company is still very focused on digitally transforming the business.

Speaker 2: a lot that we have to be excited about there and some improvements that are being made and more to be done in the future there. So we're going to stay true to those. That doesn't mean we might trim some of that back going into next year depending on what conditions look like. MODERATOR

A lot that we have to be excited about there are some improvements that are being made and more to be done in the future. There. So we're going to stay true to those.

That doesn't mean, we might trim some of that back going into next year, depending on what conditions look like.

Speaker 2: You know outside of that our next favorite spot is in returning capital back to shareholders. We think that the prices for the stock have been pretty advantageous this year. We you know we bought about we look at this both in total dollars and as a percentage of market cap and so this year we've bought back about 5% of the market cap. That's pretty much in alignment with where we've been in most years.

Outside of that our next favorite spot is in returning capital back to shareholders. We think that the prices for the stock have been pretty advantageous. This year. We bought about we look at this both in total dollars and as a percentage of market cap and so this year, we bought back about 5% of the market cap is pretty much in alignment with where we've been.

Derrek Gafford: And so that was the explanation of that. And so I think the main takeaway is what we've seen in the stabilization of our trends from a sequential perspective. Really all of those are looking good with the exception of retail. You know, we've actually got some that are performed a little better. Then we expected most kind of at expectation. The one call out if we wanted to go on the on the negative side would be retail. That one continues to weaken, but we've got some others that are strengthening and hence overall really the sequential trends are right right in line with historical averages.

In most years.

Speaker 2: We still want to keep that balance sheet really strong. As you know, we've got a lot of operating leverage in this business, which is great when revenue is on the way up. In more challenging times, that operating leverage works against us, and it's important for us to not have financial leverage on top of negative operating leverage. So we're going to stay disciplined on that part. We're not ruling out any more share repurchases, just kind of giving you some thoughts about it. From an acquisition perspective,

We still want to keep that balance sheet really strong you know as you know we've got a lot of operating leverage in this business, which is great when revenues on the way up and more challenging times that.

That operating leverage works against Us and it's important for us to not have financial leverage on the <unk> on top of negative operating leverage so.

We're going to stay disciplined on that part, but that's we're not ruling out any more share repurchases just kind of giving you. Some some thoughts about it from an acquisition perspective.

Derrek Gafford: Perfect. And didn't just one last question, you know, as you look at your segments and you talked a little bit about the staffing business being down about 14%. Just expectations of the other two business, you know, as you look at the segment. Yeah, well, if we're talking about the fourth quarter, I'm just going to go off midpoint so we've given ranges but to quote less numbers, I'm just going to give you a midpoint.

Speaker 2: That is something we're taking a look at in the future. We've talked about tuck-ins in the RPO space. Really the main priority right now, though, is just running the business, recovering the business.

That is something that we're taking a look at in the future we've talked about tuck ins in the <unk> space really the main priority right now, though is just running the business recovering the business.

Speaker 2: business development from a staffing perspective and RPO perspective, less focus on acquisitions at the current moment.

Our business development from.

A staffing perspective, and <unk> perspective, less focus on acquisitions at the current moment.

Derrek Gafford: So the midpoint of our outlook for the fourth quarter is for the company to be down about 17%. That's 15% for our two staffing segments, people management, people ready and about 30% for our appeal business at People Scout.

Speaker 6: Okay, great. And then the last thing I'd be remiss if I didn't sort of ask about the announcement that came out after the close on the addition of a Chief People Officer. So I was wondering if you could maybe shed a little light on that and talk a little bit about.

Okay, Great and then the last thing I'd be remiss, if I didn't sort of ask about the announcement that came out after the close on the addition of a chief people officer. So I was wondering if you could maybe shed a little light on that and talk a little bit about that.

Speaker 3: Sure, thank you, Mark. This is Taryn speaking. You know, I would just say overall, I'm incredibly impressed with the support and strength of our leadership team overall. And certainly glad that you saw the announcement regarding our new Chief People Officer, Greg Nettilicky, joined us today, actually, it's his first day. He brings to us outstanding experience in all aspects of HR. So really looking forward to the contribution he'll make to us as we move forward here.

Sure. Thank you Mark this is Darren speaking.

I would just say overall I'm in.

Kartik Mehta: Perfect. Thank you so much, Derek. I really appreciate it.

Operator: Thank you.

Incredibly impressed with the support and strength of our leadership team overall and certainly glad that you saw the announcement regarding our new Chief people Officer, Greg <unk> joined US today actually is his first day and he brings to US outstanding experience in all aspects of HR that really.

Mark Riddick: Our next question comes in the line of Mark Riddick with Sudoti. Please proceed with your question. Good evening, everyone. Hey, Mark. I just wanted to first thank you for everything in all of your assistance. Derek, over there is internally looking forward to moving forward and hope all goes well that you're looking for there. I did want to just touch a little bit on revenue mix that you touched on in prepared remarks.

Looking forward to the contribution he'll make to us as we move forward here.

Great. Thank you very much.

Speaker 1: Thank you. Our next question comes from the line of Mark McCrone with Baird. Please proceed with your question.

Thank you. Our next question comes from the line of Mark Macfarlane with Baird. Please proceed with your question.

Mark Riddick: Maybe you could shed a little more light on the renewables commentary and the sort of the past to effect and how that sort of plays into the revenue mix impact and then I have a quick follow up on cash flow. Yeah, well, when we're talking about the renewable space, that has been a bright spot for us. And so if we're talking on a year over year basis, renewable energy for us was up about 80%.

Speaker 5: Good afternoon, and let me extend my thanks to Derek. It's been great working with you over the last 20 years, Derek. So really appreciate everything that you've done.

Good afternoon.

Let me extend my thanks to Derek it's been great working with you over the last 20 years, Derek So really appreciate everything that you've done.

Mark Riddick: And so that's continuing to be a really strong dynamic for us not just on a year over year basis, but each quarter sequentially we've been building some run right there. So our renewable energy for the third quarter was about 40 million in total. Okay, that's definitely how it seemed as though it would have to be a nice game there to have the mixed impact. I was wondering if we could sort of follow up on cash flow and cash usage prioritization and know certainly that having a clean balance sheet and challenging demand times is certainly very advantageous.

Can you talk a little bit about.

Speaker 5: Can you talk a little bit about the people scout business? You know, there's commentary with regards to, you know, some clients have been pulling back. Some are pulling, you know, resources in house. Can you talk a little bit about like

The people scalp business Theres commentary with regards to some clients have been pulling back some are pulling resources in house can you talk a little bit about like.

Speaker 5: what percentage of the clients are just pulling back their volumes versus what percentage are bringing things in-house? And can you also describe, you know, what are you seeing in terms of new RFPs and, you know, any line of sight in terms of decisions that could be coming up and how you're thinking about win rates and your competitive position in that particular space?

What percentage of the clients are just pulling back their volumes versus what percentage are bringing things in house and can you also describe what are you seeing in terms of new rfps.

And any line of sight in terms of decisions that could be coming up and.

How are you thinking about win rates in your competitive position in that particular space.

Speaker 3: Sure, so Mark, in the people scout business, the primary driver here is reduced volumes within our existing customers. And where our customers have relied more on internal resources, it's really around the...

Sure So mark.

And then people scout business. The primary driver here is reduced volumes within our existing customers.

And where our customers have relied more on internal resources, it's really around the hard.

Mark Riddick: Is there anything that we should be thinking about as far as internal investments that are on the horizon for the digital capabilities or is there anything lumpy that we should be thinking about as far as any any potential needs in the coming quarters? No, nothing really lumpy out there. You know, from a cash flow perspective and a use of capital perspective, investing back in the business that has been our priority. Both from an operating expense perspective use of capital as well as from a cap X perspective largely in technology.

Speaker 3: the focus on keeping them busy and retaining that internal talent acquisition team during a time of a hiring slowdown. So we're certainly still engaged with those customers and ready to support them as their needs increase, but they're really focused on ensuring that they're able to keep their internal record.

Our focus on keeping them busy and retaining that internal talent acquisition team during a time of a hiring slowdown. So we're certainly still engaged with those customers and ready to support them as their needs increase but they're really focused on ensuring that they are able to keep their internal recruiters.

Speaker 3: retained and busy during this slower time. So we're seeing across the board lower hiring volumes. Some of our customers are on hiring freezes or have initiated additional approval requirements in the hiring process to just slow that overall process down as they look to gain more insight on what their future needs.

<unk> retained and busy during this slower time, so we're seeing across the board lower hiring volumes. Some of our customers are on hiring freezes or have initiated.

Mark Riddick: So the company is still very focused on digitally transforming the business. There's a lot that we have to be excited about there and some improvements that are being made and more to be done in the future there. So we're going to stay true to those. That doesn't mean we might trim some of that back, you know, going into next year depending on what conditions look like. You know, outside of that our next favorite spot is in returning capital back to shareholders.

Additional approval requirements in the hiring process to just slow.

All of that overall process down as they look to gain more insight on what their future needs may be.

Speaker 3: From a sales perspective, the pipeline, I would say, just from an average deal size perspective, is just down in terms of what we are accustomed to seeing. Last year, our average deal size was about $3 million in the pipeline. It's a million now, and the deals are just taking longer to pay.

From a sales perspective.

The pipeline I would say just from an average deal size perspective is just down on.

In terms of what we are accustomed to seeing our last year. Our average deal size was about $3 million in the pipeline. It's a million now and the deals are just taking longer to close we are seeing some activity in our shorter term solutions with people Scout we offer a.

Mark Riddick: We think that the the prices for the stock have been pretty advantageous this year. You know, we've bought about we look at this both in total dollars and as a percentage of market cap. And so this year we've bought back about 5% of the market cap. That's pretty much an alignment with where we've been in most years. We still want to keep that balance sheet really strong. You know, as you know, we've got a lot of operating leverage in this business, which is great when revenues on the way up and more challenging times that that operating leverage works against us.

Speaker 3: We are seeing some activity in our shorter term solutions with People Scout. We offer a service called Recruiter on Demand, where we're offering recruiters to supplement in-house recruiting teams and Project RCO solutions. So we will provide those kinds of solutions to stay engaged with customers and can expand upon those relationships and opportunities when they're rebound, when they're needed.

Service called recruiter on demand, where we're offering recruiters to supplement in house recruiting teams and project our field solutions. So we will provide those kind of solutions to stay engaged with customers and can expand upon those relationships and opportunities when theyre rebound when when their needs rebound.

Mark Riddick: And it's important for us to not have financial leverage on top of negative operating leverage. So we're going to stay disciplined on that part. That's we're not ruling out any more sharing purchases just kind of giving you some thoughts about it. From an acquisition perspective, that is something that we're taking a look at in the future. We've talked about, you know, tuck ins in the RPO space really though the main priority right now though is just running the business, recovering the business business development from from a staffing perspective and RPO perspective. Less focus on acquisitions at the current moment. Okay, great.

Speaker 5: And then, Taryn, what percentage of your current clients are just going through that lower volume versus what percentage of the clients, you know, have gotten down to the point where

And then Karen what percentage of your current clients are just going through that lower volume versus what percentage of the clients have gotten down to the point where.

Speaker 5: um you know they're just they they don't have needs beyond their internal resources but they're still keeping you and

They are just they don't have needs beyond their internal resources, but theres still keeping you in.

Speaker 5: as a vendor should the needs come up and.

Yeah.

The vendor should the needs come up.

<unk>.

Speaker 5: So to what extent, if any, did you lose any clients completely?

To what extent if any did you lose any clients completely.

Taryn Owen: And then the last thing I'd be remiss if I didn't sort of ask about the announcement that came out after the close on the addition of the chief people officer. So I was wondering if you could maybe set a little light on that and talk a little bit about that. Sure. Thank you, Mark.

Speaker 3: Yeah, it's a small percentage, just a couple of customers that have taken, we don't have any volume whatsoever with.

Yes, it's a small it's a small percentage just a couple of customers that have taken where we don't have any volume I'll whatsoever with them at this point.

Taryn Owen: This is Karen speaking. You know, I would just say overall I'm incredibly impressed with the support and strength of our leadership team overall. And certainly glad that you saw the announcement regarding our new chief people officer, Greg Nettle, who joined us today actually is his first day. He brings to us outstanding experience and all aspects of HR. So really looking forward to the contribution he'll make to us as we move forward here. Great. Thank you very much. Thank you.

Okay, Great and then.

Speaker 5: Right. And then, you know, if the environment, it doesn't sound like you're saying that

If the environment it doesn't sound like you are saying that.

Speaker 5: things are stabilizing or picking up. Maybe that's just because we typically wait till the end of month before determining where things are. But you gave favorable commentary on on the on the people ready side about a couple of segments, like manufacturing and transportation, showing a little bit more stability, but you didn't say anything like that on the RPO side.

Things are stabilizing or picking up maybe that's just because we typically wait until the end of the month before determining where things are.

But you gave favorable commentary on the.

On the people ready side about a couple of segments like manufacturing and transportation, showing a little bit more stability, but you didn't say anything like that on.

<unk> side.

Speaker 5: If things continue to trend down, how should investors think about, you know, kind of the margin range and how much room do you have in terms of cost management on that?

If things continue to trend down how should investors think about.

Mark McCroen: Our next question comes from the line of Mark McCroen with Baird. Please proceed with your question. Good afternoon. And let me extend my thanks to Derek. It's been great working with you over the last 20 years, Derek. So really appreciate everything that you've done.

Kind of the margin range and how much room do you have in terms of cost management on that side.

Speaker 2: Mark, I'll take that one. Yeah, we did talk about seeing some potential signs of stabilization in our staffing businesses. We're not seeing that yet.

Mark I'll take that one yeah.

We did talk about seeing some potential signs of stabilization in our staffing businesses, we are not seeing that yet.

Mark McCroen: Can you talk a little bit about the people scout business. You know, there's commentary with regards to, you know, some clients have been pulling back, some are pulling, you know, resources in house. Can you talk a little bit about like what percentage of the clients are just pulling back their volumes versus what percentage are bringing things in house. And can you also describe, you know, what are you seeing in terms of new RFPs and, you know, any line of sight in terms of decisions that could be coming up and how you're thinking about when rates and your competitive position in that particular space.

Speaker 2: with PeopleScout. However, I don't think that we would expect to see it. One, the stabilization

With people Scout However, I don't think that we would expect to see it won the stabilization.

Speaker 2: if we want to even call it stable. This has been a short period on the staffing side. So as we said before, we're seeing it now. Too soon to tell whether it has staying power.

If we want to even call. It stable. This has been a short period on the staffing side. So as we said before that we're seeing it now too soon to tell whether it has staying power.

Speaker 2: However, our experience has been through multiple cycles. This is where we would start to probably see stabilization first is on the staffing side.

Over our experience has been through multiple cycles. This is where we would start to probably see stabilization first is on the staffing side.

Speaker 2: Just like we would expect to see staffing kind of go first and then per placement follow, we would expect to see things stabilize and improve on the staffing side and then people scout tend to follow.

Just like we would expect to see staffing kind of go first and then Perm placement follow we would expect to see things stabilize and improve on the staffing side and then people scout.

Tend to follow.

Speaker 2: When it comes to the margin profile, you know, you can see even with this drop off, we turned in a 12% segment profit margin.

When it comes to the margin profile you can see even with this drop off we turned in a 12% segment profit margin.

Mark McCroen: Sure. So Mark, the, in the people scout business, the primary driver here is reduced volumes within our existing customers. And where our customers have relied more on internal resources, it's really around the. The focus on keeping them busy and retaining that internal talent acquisition team during a time of a hiring slowdown. So we're certainly still engaged with those customers and ready to support them as their needs increase, but they're really focused on ensuring that they're able to keep their internal recruiters retained and busy during this slower time.

And so.

Speaker 2: out of all of our businesses, this is where it's the most variable from the standpoint that we don't have branch locations here that have to be staffed.

Out of all of our businesses. This is where it's the most variable from the standpoint that we don't have branch locations here that have to be staffed.

Speaker 2: to keep running. We don't have on-site operations. There are minimums there. Now there are certain minimums too when it comes to RPO clients, but there's more flexibility.

To keep running we don't have onsite operations. There are minimums. There now there are certain minimums to when it comes to <unk> clients, but theres more flexibility there.

Speaker 2: So we still turned in a 12% margin. You heard some of my statistics earlier about the number of folks that we've...

So we still turned in a 12% margin you heard some of my statistics earlier about the number of folks that we've.

Speaker 2: had to downsize from to protect those margins. And there's more that we think we can do if we need to, both from a people perspective, a service delivery perspective, and a technology perspective to try to keep that margin from falling into single digits, at least on an annual basis. Quarters can be lumpy, but on an annual basis we think we got a good shot at keeping that at 10% plus.

Had to downsize from to protect those margins and Theres more that we think we can do if we need to both from a people perspective, a service delivery perspective, and a technology perspective to try to keep that that margin from falling into.

Mark McCroen: So we're seeing across the board, lower hiring volumes. Some of our customers are on hiring freezes or have initiated additional approval requirements in the hiring process to just slow that overall process down as they look to gain more insight on what their future needs may be. From a sales perspective, the pipeline I would say just from an average deal size perspective is just down in terms of what we are accustomed to seeing.

Single digit at least on an annual basis quarters can be lumpy, but on an annual basis. We think we got a good shot at keeping that at a 10% plus.

Okay.

Speaker 5: I mean, even during 2020 with COVID.

I mean, even during 2020 with Covid.

Speaker 5: you were able to, by the fourth quarter, get to like an 11% margin. Obviously, there was a huge hit in Q2 and Q3 of 2020. But is that kind of, when we think about like the fourth quarter of 2020, when you were running at $41 million, does that seem like kind of like that's about as low as the margins would go? Or could we go into the single digits, do you think?

You were able to by the fourth quarter get to like <unk>.

11% margin, obviously, there was a huge hit in Q2 and Q3 of 2020, but.

Is that kind of.

Mark McCroen: Last year, our average deal size was about $3 million in the pipeline. It's a million now and the deals are just taking longer to close. We are seeing some activity in our shorter term solutions with people scout. We offer a service called Recruiter on Demand where we're offering recruiters to supplement in-house recruiting teams and project our CO solutions. So we will provide those kind of solutions to stay engaged with customers and can expand upon those relationships and opportunities when they're rebound, when their needs rebound.

When we think about like the fourth quarter of 2020, when you were running at $41 million does that seem like kind of like that is about as low as the margins would go or.

Could we go into the single digits do you think.

Speaker 2: Well, I guess we'll have to see what happens, you know, from an operating environment perspective.

Well I guess, we'll have to see what happens.

You know from an operating environment perspective.

Speaker 2: You know, if things were to get in another bona fide recession on top of where we're at right now, we could see a single digit.

You know if things were to get in a bonus another bonafide recession on top of where we're at right now you could see single digits.

You know if things were to get in a bonus another bonafide recession on top of where we're at right now you could see single digits.

Speaker 2: I think what we're looking at right now with the run race that we've got and with a little slippage in place, we feel like we can make some adjustments.

What we're looking at right now with the run rates that we've got and with a little slippage in place we feel like we can make some adjustments.

Mark McCroen: Terran, what percentage of your current clients are just going through that lower volume versus what percentage of the clients have gotten down to the point where they don't have needs beyond their internal resources, but they're still keeping you as a vendor should the needs come up. And to what extent, if any, did you lose any clients completely? Yeah, it's a small percentage, just a couple of customers that have taken where we don't have any volume whatsoever with them at this point.

Speaker 2: you know, with still positive GDP out there to do what we just talked about, keeping it out of the single digit realm.

You know with still positive GDP out there to do what we've just talked about keeping it out of the single digit realm.

Speaker 5: Okay, great. And then with regards to people ready in terms of, you know, in terms of the digitization efforts, can you give us an update in terms of job stack and some of the statistics?

Okay, Great and then with regards to people ready in terms of.

In terms of the Digitization efforts can you give us an update in terms of job stack and some of the statistics.

Speaker 3: Sure, happy to do that. Job stack certainly has continued to be a critical component of our people ready business.

Sure happy to do that.

Jobs that certainly has continued to be a critical component of our people ready business.

Speaker 3: We have about 90% of our associates utilizing the app and 330,000 customers that engage at any given time. You know, as Derek mentioned, we are focusing, continuing to focus investment in Jobstack with all of the development really centered around improving the usability and experience for our customers, our associates, and our internal staff. So I'll give you a couple of examples.

We have about 90% of our associates utilizing the app and 330000 customers that engage at any given time.

Taryn Owen: Okay, great. And then, you know, if the environment, it doesn't sound like you're saying that things are stabilizing or picking up. Maybe that's just because we typically wait till the end of months before determining where things are, but you gave favorable commentary on the people ready side about a couple of segments, like manufacturing and transportation, showing a little bit more stability, but you didn't say anything like that on the RPO side. If things continue to trend down, how should investors think about, you know, kind of the margin range and how much room do you have in terms of cost management on that side?

As Eric mentioned, we are focusing continuing to focus investment and job stack with all of the development really centered around improving the usability and experience for our customers our associates and.

And our internal staff. So I'll give you a couple of examples on the client side. Our clients are now able to approve time directly in the App, which saves them time and allows our associates to be paid.

Speaker 3: On the client side, our clients are now able to approve time directly in the app, which has saved them time and allows our associates to be paid more quickly once their assignment ends. On the associate side, we've been improving upon the job searching capabilities, including kind of filtering for location proximity, which was a desire by our associate.

More quickly once their assignment ends on the associate side, we've been improving upon the job searching capabilities, including kind of filtering.

Four location proximity which was a desire by our associates.

Speaker 3: And for our internal staff, they now have improved visibility through the platform into orders and available associates that can be matched to jobs increasing their efficiency level. So we continue to make those improvements, again, really focused on improving upon the because it makes it easy to get to work even before dice, you know, videos in the background,

Derrek Gafford: I'll take that one. Yeah, we did talk about scenes of potential signs of stabilization or staffing businesses. We have not seen that yet, with PeopleScout. However, I don't think that we would expect to see it. One, the stabilization, if we want to even call it stable, it's been a short period on the staffing side. So as we said before, we're seeing it now too soon to tell whether it has staying power.

And for our internal staff. They now have improved visibility through the platform into orders and available associates that can be matched to the jobs are increasing their efficiency levels. So we.

We continue to make those improvements again really focused on improving upon the usability.

Speaker 5: Great. And then on the gross margins, mentioned that the workers comp, we basically the the accruals weren't quite as favorable anything to point out there in terms of anything unusual.

Okay, Great and then on the gross margins.

Mentioned the <unk>.

Workers comp.

We basically the accruals weren't quite as favorable anything to point out there in terms of anything unusual.

Derrek Gafford: However, our experience has been through multiple cycles. This is where we would start to probably see stabilization first is on the staffing side. Just like we would expect to see staffing kind of go first and then per replacement follow, we would expect to see things stabilize and improve on the staffing side and then people scout tend to follow. When it comes to the margin profile, you know, you can see even with this drop off, we turned in a 12% segment profit margin.

Speaker 2: No, I don't think so, Mark. You know, as you know, that's a big cost for us. It's a big item on our balance sheet, and it's a really long-tailed liability.

No I don't think so mark you know.

As you know that's a that's a big cost for us, it's a big item on our balance sheet and it's a really long tail liability.

Speaker 2: And, you know, just like you would have with any other insurance company, there's adjustments that can kind of go back and forth, and it could be a little lumpy at times. And so that's really it. You know, there were just, there were less favorable adjustments to prior year reserves this quarter.

And just like you would have with any other insurance company, there's adjustments that can kind of go back and forth and it could be a little lumpy at times and so that's.

That's really it in other words, just there were less.

Favorable adjustments to prior year reserves this quarter.

Derrek Gafford: And so out of all of our businesses, this is where it's the most variable from the standpoint that we don't have branch locations here that have to be staffed to keep running. We don't have on-site operations. There are minimums there. Now there are certain minimums too when it comes to RPO clients, but there's more flexibility there. So we've still turned in a 12% margin. You heard some of my statistics earlier about the number of folks that we've had to downsize from to protect those margins.

Speaker 2: than what we saw the same quarter last year. However, when you take a look at the expense, there's a lot of consistency in it. I mean, Workcare's comp as a percentage of revenue came out at 1.7 this quarter. It was 1.7 last quarter. It was 1.7% in Q2 of last year. It's just in Q3 of last year it was lower than that because there was a nice lumpy benefit, larger benefit in not hitting the work comp.

Then what we saw the same quarter last year. However, when you take a look at the expenses a lot of consistency in it I mean workers' comp as a percentage of revenue came at about $1. Seven this quarter. It was $1 seven last quarter. It was one 7% in.

Q2 of last year, just in Q3 of last year.

It was lower than that because they were there was a nice lumpy.

Benefit larger benefit hitting.

Hitting the work comp line.

Derrek Gafford: And there's more that we think we can do if we need to, both on people perspective, a service delivery perspective and a technology perspective to try to keep that margin from falling into single digits. At least on an annual basis, quarters can be lumpy, but on an annual basis, we think we got a good shot at keeping that at 10% plus.

Speaker 5: Great. And then on the balance sheet and cash flows, when we take a look at the accounts receivables, how are DSOs trending? Because look like receivables were use of, of, of funds of cash. We didn't get the normal harvest that we typically get when revenue declines. What what's occurring there?

Okay, Great and then on the balance sheet and cash flows when we take a look at the accounts receivables.

How our dsos trend because it looked like receivables were use of Av.

Funds of cash.

We didn't get the normal harvest that we typically get on revenue declines.

Derrek Gafford: Okay. And I mean, I mean, even during 2020 with COVID, you were able to, by the fourth quarter, get to like, you know, 11% margin. Obviously there was a huge hit in Q2 and Q3 of 2020. But is that kind of when we think about like the fourth quarter of 2020, when you were running at $41 million, does that seem like kind of like that's as low as the margins would go or, you know, could we go into the single digits, do you think?

What's occurring there.

Speaker 2: Well, when it comes to accounts receivable...

Well when it comes to accounts receivable.

Speaker 2: at least for the year, you may be doing your own math on the quarter for the year, you know, it's $35 million to the positive. Right, but I'm talking about for the quarter sequentially. Yeah, well, for the year over year, if we just kind of get to your question, DSO is up about one day year over year.

At least for the year you may be doing your own math on the quarter for the year.

It's $35 million to the positive.

Alright.

I'm talking about for the quarter sequentially.

Yeah.

Well for the.

Year over year, if we just kind of get to your question Dsos up about one day year over year.

Speaker 2: So we're not really seeing a big slide on the accounts receivable side. We just saw, you know, if you take a look from Q2 to Q3, our revenue dollars were about the same this year.

So we're not really seeing a big slide.

The accounts receivable side, we just saw if you take a look from Q2 to Q3 our revenue.

Derrek Gafford: Well, I guess we'll have to see what happens, you know, from an operating environment perspective. You know, it seems we're to get in a bone, another bona fide recession on top of where we're at right now. We could see single digits. I think what we're looking at right now with the run race that we've got and with a little slippage in place, we feel like we can make some adjustments. You know, with still positive GDP out there to do what we've just talked about keeping it out of the single digit realm. Okay.

<unk> dollars were about the same this year.

Speaker 2: We didn't have anything where we went from Q2 to Q3 seeing any kind of decline. They were just stable. We had one day of DSO increase year over year. Sequentially, it was up a bit more than that, but Q2 of this year was unseasonably low as well.

And so we didn't we didn't have anything where we went from Q2 to Q3 seeing any kind of decline they were just stable. So.

Mark Riddick: Great.

We had one day of DSO.

<unk> increased year over year sequentially, it was up a bit more than that but Q2 of this year was on.

Seasonally low as well.

Speaker 5: Okay, but I mean, we should end up having some harvesting here in the.

Okay, but I mean, we should end up having some harvesting here in the.

Speaker 5: in the fourth quarter. I mean, free cash flow should, there's just a timing.

In the fourth quarter I mean.

Free cash flow should.

Taryn Owen: And then with regards to people ready in terms of, you know, in terms of the digitization efforts, can you give us an update in terms of job stack and some of the statistics? Sure. Happy to do that. Job stack certainly has continued to be a critical component of our people ready business. We have about 90% of our associates utilizing the app and 330,000 customers that engage at any given time. You know, as Eric mentioned, we are focusing continuing to focus investment in job stack with all of the development really centered around improving the usability and experience for our customers are associates and our internal staff.

There is a timing difference.

Speaker 5: Recash flow should rebound pretty nicely in the fourth quarter, no? That's right.

Free cash flow should rebound pretty nicely in the fourth quarter now.

That's right that's exactly right.

Speaker 5: Okay, great. Look forward to talking post call. Thanks.

Okay great.

Forward to talking post cost thanks.

Speaker 1: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Tayrun for closing comments.

Thank you there are no further questions at this time I'd like to turn the floor back over to <unk> for closing comments.

Speaker 3: Thank you, operator, and thank you everyone for joining us today. I look forward to meeting many of you at investor events over the coming year and keeping you updated on our progress. I also want to thank the entire True Blue team for their tremendous efforts and continued focus on fulfilling our mission to connect people and work. If you have any questions, please don't hesitate to reach out. Have a great evening.

Thank you operator, and thank you everyone for joining us today I look forward to meeting many of you at investor events over the coming year and keeping you updated on our progress.

I also want to thank the entire <unk> team for their tremendous efforts and a continued focus on fulfilling our mission to connect people and work.

Taryn Owen: So I'll give you a couple of examples on the client side. Our clients are now able to approve time directly in the app, which has saved them time and allows our associates to be paid more quickly. Once their assignment ends on the associate side, we've been improving upon the job searching capabilities, including kind of filtering for location proximity, which was a desire by our associates. And for our internal staff, they now have improved visibility through the platform into orders and available associates that can be matched to jobs, increasing their efficiency level.

If you have any questions. Please don't hesitate to reach out and have a great evening.

Speaker 1: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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

[music].

Hum.

Derrek Gafford: So we continue to make those improvements, again, really focused on improving upon these. Great. And then on the gross margins mentioned the workers comp, we basically, the accruals weren't quite as favorable. Anything to point out there in terms of anything unusual? No, I don't think so, Mark. You know, when, as you know, that's a, that's a big cost for us. It's a big item on our balance sheet. And it's a really long tailed liability.

Yeah.

Yeah.

Hum.

Derrek Gafford: And, you know, just like you would have with any other insurance company, there's adjustments that can kind of go back and forth, and it could be a little lumpy at times. And so, that's really it. You know, there were just, there were less favorable adjustments to prior year reserves, this quarter, than what we saw the same quarter last year. However, when you take a look at the expenses, a lot of consistency in it.

Yeah.

Okay.

Yeah.

Hum.

Hum.

Yeah.

Hmm.

Hum.

Derrek Gafford: I mean, workers comp was a percentage revenue came out of $1,000,000. $1.7 in this quarter. It was 1.7 last quarter. It was 1.7% in Q2 of last year. It just in Q3 of last year, it was lower than that because there was, there was a nice lumpy benefit, larger benefit hitting the work comp line. Okay.

[music].

Hum.

Mhm.

[music].

No.

Hum.

[music].

Derrek Gafford: Great. And then on the balance sheet and cash flows, when we take a look at the accounts receivables, how are DSOs trending because look like receivables were a use of funds of cash. We didn't get the normal harvest that we typically get on revenue declines.

Okay.

[music].

Uh huh.

[music].

Hum.

Uh huh.

Derrek Gafford: What's occurring there? Well, when it comes to accounts receivable, at least for the year, you may be doing your own math on the quarter for the year, you know, it's, it's $35 million to the positive. Right. But I'm talking about for the quarters sequentially. Yeah. Well, for the year over year, if we just kind of get to your question, DSOs up about one day year over year. So we're not really seeing a big slide on the accounts receivable side.

Derrek Gafford: We just saw, you know, if you take a look from Q2 to Q3, our revenue dollars were about the same this year. And so we didn't, we didn't have anything where we went from Q2 to Q3, seeing any kind of decline, they were just stable. So we had one day of DSO increase year over year sequentially. It was up a bit more than that, but Q2 of this year was unseasonably low as well.

Derrek Gafford: Okay. But I mean, we should end up having some harvesting here in the, in the, in the fourth quarter. I mean, free cash flow should, there's just a timing difference. And free cash flow should rebound pretty nicely in the fourth quarter now. That's, that's, that's right. That's exactly right. Okay. Great.

Mark McCroen: Thank you for the talking post call. Thanks.

Operator: Thank you. There are no further questions at this time.

Taryn Owen: I'd like to turn the floor back over to Taran for closing comments. Thank you operator and thank you everyone for joining us today. I look forward to meeting many of you at investor events over the coming year and keeping you updated on our progress. I also want to thank the entire TrueBlue team for their tremendous efforts and continued focus on fulfilling our mission to connect people and work. If you have any questions, please don't hesitate to reach out.

Operator: Have a great evening. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you very much.