TrueBlue, Inc. Q1 FY2022 Earnings Call

Thank you all for joining us, and welcome to the TrueBlue First Quarter 2022 Earnings Call. To avoid background noise, all lines are muted. There will be a question-and-answer session following the speakers' remarks. Derrek Gafford, Executive Vice President and CFO, you can start the conference now.

Good afternoon, everyone, and thank you for joining today's call. I'm joined by our Chief Executive Officer, Patrick Beharelle. Before we begin, I want to remind everyone that today's call and slide presentation contain forward-looking statements, all of which are subject to risks and uncertainties, and we assume no obligation to update or revise any forward-looking statements. These risks and uncertainties, some of which are described in today's press release and in our SEC filings, could cause actual results to differ materially from those in our forward-looking statements. We use non-GAAP measures when presenting our financial results. We encourage you to review the non-GAAP reconciliations in today's earnings release or at trueblue.com, under the Investor Relations section, for a complete understanding of these terms and their purpose. Any comparisons made today are based on a comparison to the same period in the prior year unless otherwise stated. Lastly, we will be providing a copy of our prepared remarks on our website at the conclusion of today's call and a full transcript and audio replay will also be available soon after the call. With that, I'll turn the call over to Patrick.

Thank you, Derrek, and welcome, everyone, to today's call. I am pleased to report our strong performance trends from 2021 continued into the first quarter, with all three segments capitalizing on a widespread demand for our services, led by PeopleScout, which delivered a fourth consecutive quarter of revenue growth. Overall revenue was $552 million, an increase of 20% compared to Q1 2021, marking the fourth consecutive quarter of double-digit growth. PeopleReady revenue trends benefited from historically high bill rates and worker supply improvements, while contributions from new and existing client demand drove PeopleScout results. We are also pleased with the revenue growth in our PeopleManagement business despite global supply chain challenges. These factors, along with our continued focus on improving operational efficiencies, produced a net income of $11 million, an increase of $4 million compared to Q1 2021. Let's take a closer look at the performance of each of our three segments starting with PeopleReady. PeopleReady is our largest segment, representing 58% of total trailing 12 months revenue and 61% of total segment profit. PeopleReady is a leading provider of on-demand labor and skilled trades in the North American industrial staffing market. We service our clients via a national footprint of physical branch locations as well as our JobStack mobile app. PeopleReady revenue was up 17% compared to Q1 2021. Bill rates are at historic highs and outpacing pay rates, while worker supply continued to improve and performance within retail and hospitality was solid. PeopleManagement is our second largest segment representing 29% of total trailing 12-month revenue and 9% of total segment profit. PeopleManagement provides onsite industrial staffing and commercial driver services in the North American industrial staffing market. The essence of a typical PeopleManagement engagement is supplying an outsource workforce that involves multiyear, multimillion-dollar onsite or driver relationships. We are very pleased with PeopleManagement growth this quarter, with revenue up 8% compared to Q1 2021. Same-site sales in our onsite business produced year-over-year growth despite global supply chain challenges, and demand for our commercial trucking services remained robust. Turning to our third segment, PeopleScout represents 13% of total trailing 12-month revenue and 30% of total segment profit. PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing services as well as offering managed service provider solutions. PeopleScout delivered a fourth consecutive quarter of growth with revenue up 76% compared to Q1 2021. Results this quarter benefited from a combination of the restaffing surge of existing clients that started to ramp in Q2 2021, higher employee attrition rates at our existing clients, and new client wins. Before turning to our strategies, I want to provide a bit of context for recent business trends. During the back half of March, we typically see a seasonal increase in PeopleReady revenue. This year, the ramp was less due to seasonal and project work in the retail industry that will not carry into Q2, as well as some clients taking a more measured approach to on-demand temp labor as a result of broader economic uncertainty. On the plus side, sequential growth for PeopleReady in April has been in line with historical norms. Revenue trends for PeopleManagement and PeopleScout continued to perform as expected. Now I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady. At PeopleReady, our most important strategy is to further digitalize our business model to gain market share and improve the efficiency of our service delivery cost structure. The U.S. temporary day labor market is highly fragmented, and there are very few large players in the industrial staffing segment where PeopleReady competes with the bulk of the market made up of smaller companies. These smaller regional companies are typically not able to spend the type of investment required to deploy something like our JobStack mobile app. So this, along with our nationwide footprint, is what makes us a leading provider within industrial staffing. At the center of our digital strategy is JobStack. The application has created a unique user experience for our associates and clients, allowing both groups to connect at any time. Since deploying the application nearly five years ago, associate opt-in has grown to over 90%. Turning to clients, total users of the application are 29,900, a 13% increase versus Q1 2021. We continue to focus on converting clients to heavy users. As a reminder, a heavy client user has 50 or more touches on JobStack per month, whether it's entering an order, rating a worker, or approving time. Overall, heavy client users account for 57% of PeopleReady U.S. on-demand revenue, compared to 44% in Q1 2021. We've also seen continued growth in our digital fill rates, which have increased to nearly 60%, with 792,000 shifts filled via the app during the quarter. Not only does JobStack provide a differentiated experience, but it is also a key enabler for our service center strategy, which aims to better serve existing clients and reach new ones more effectively. Enhanced go-to-market approaches increase operating hours by 25 hours per week compared to a typical branch and include repurposed job roles. This includes the addition of territory-based account managers responsible for expanding and building relationships with new and existing clients, and the reduction of non-client-facing positions resulting in a net cost reduction. We expect the new structure will deliver a greater sales focus and provide elevated customer service. Last year, we successfully launched and later expanded the territorial coverage of two service center pilots. In addition, earlier this year, we opened a service center dedicated to skilled trades and added a fully virtual model to test. Results for all pilot locations continue to improve as we advance the operating model and apply learnings. For example, we're learning that the virtual model tends to have materially lower employee attrition, thus creating more continuity, potentially leading to better financial metrics relative to the other models. As we move forward, we will be closely assessing the progress of both physical and virtual models to develop the most ideal structure for the business. Turning to PeopleManagement, our strategy is focused on execution and growing our client base. We continue to invest in our sales teams to enhance business development activities, and we remain focused on expanding our geographic footprint by targeting more local and underserved markets. Coming off a record level of new wins last year, PeopleManagement has secured annualized new business wins of $21 million this year, up more than 40% versus the three-year comparable average prior to 2021. The continued strength in new wins, as well as improving trends in existing client sales, are helping to offset recent global supply chain challenges. Additionally, we're investing in customer and associate care programs in an effort to better serve our clients’ needs and improve retention. Turning to PeopleScout, our strategy leverages our strong brand reputation to capture opportunities in an industry poised for growth. Many companies reduced or eliminated their in-house recruiting teams during the pandemic, and now we're seeing companies return to hybrid and fully outsourced models. Our ability to hire large volumes of workers has allowed us to meet the demand of our existing client base as they are restaffing to pre-pandemic levels, specifically within travel and leisure. To capitalize further, we made investments in our sales teams to expand the wallet share to existing clients and obtain new clients. Our efforts continue to deliver strong results with annualized new wins of $12 million this year, up 27% versus the prior year. Our ongoing commitment to our digital strategies, combined with our focus on improving operational efficiencies, are driving operating margin expansion and creating a competitive advantage for us in the market. I'll now pass the call over to Derrek, who will share greater detail around our financial results.

Thank you, Patrick. Total revenue for Q1 2022 was $552 million, representing growth of 20%. This growth was driven by strong overall demand as all three segments reported revenue growth for the quarter. PeopleReady continued to command higher bill rates and capitalize on improvements in worker supply. PeopleManagement returned to growth this quarter despite global supply chain challenges, while PeopleScout continued to see heightened demand from both new and existing clients. We posted net income of $11 million or $0.30 per share, an increase of $4 million, and adjusted EBITDA was $23 million, an increase of $9 million. Our net income and adjusted EBITDA margins grew by 40 and 120 basis points respectively, driven by revenue growth and gross margin expansion. The gross margin for Q1 2022 of 25.4% was up 130 basis points, where staffing segments contributed 110 basis points of margin expansion driven by 40 basis points from favorable bill pay spreads, 30 basis points from increasing PeopleReady sales mix, which carries a higher margin than PeopleManagement, and 40 basis points split between workers' compensation and customer mix. PeopleScout also contributed from higher sales mix providing 20 basis points of benefit. SG&A expense increased 24%, which was higher than our revenue growth of 20% due to two factors. First, we are in the process of redesigning our front office technology for PeopleReady this year, which houses our applicant and customer tracking systems. As planned, we spent $3 million this quarter as we prepare to fully implement this system next year. These costs are excluded from adjusted EBITDA and adjusted net income. Viewing SG&A growth on an adjusted basis resulted in an increase of 21%, essentially in line with revenue growth. Second, we are still laughing temporary cost cuts made in 2020. Since Q1 is our seasonally lowest volume quarter, it is also our low point in SG&A dollars, making the laughing of these cost cuts more pronounced on a percentage basis. We expect year-over-year adjusted SG&A in the second quarter of 2022 to grow about half the rate it grew in Q1 2022. The bottom line is we are running the company more efficiently today than pre-pandemic due to our operational improvements and digital strategies. SG&A as a percentage of revenue in Q1 2022 improved by 130 basis points in comparison with Q1 2019. Our effective income tax rate was 16% in Q1 versus a tax benefit of 2% in the first quarter of last year. Turning to our segments, PeopleReady revenue increased 17% while segment profit increased 37% and segment profit margin was up 70 basis points. Bill rates grew at double digits for the fourth consecutive quarter and outpaced pay rates, which boosted segment profit margin. Average weekly associates put to work were up 12% year-over-year. We saw widespread growth from a geographic perspective with growth in 18 of our top 20 states. From an industry perspective, results were particularly strong in retail due in part to project and seasonal work, and hospitality continues to deliver. PeopleManagement returned to growth this quarter as revenue increased 8%; however, we did see a slight pullback in segment profit, which decreased 4% but 30 basis points of segment profit margin contraction. Our onsite businesses provided three points of revenue growth and strong demand in our commercial driving business contributed the other five points of growth. The decline in segment profit margin was due to a benefit in the prior year's credit loss reserve. PeopleScout revenue increased 76% with segment profit at $7 million and over 400 basis points at segment profit margin expansion. This marks the highest quarterly revenue in the history of PeopleScout. These results reflect increasing volumes from same customer demand, most notably with travel and leisure clients, as well as new business. Operating leverage from higher sales volumes contributed to the improvement and year-over-year segment profit margin expansion. Now let's turn to the balance sheet and cash flows. Our balance sheet is in great shape. We finished the quarter with $37 million in cash and $4 million in outstanding debt. The business is producing strong cash flows with year-to-date cash flow from operations totaling $26 million, and we returned $36 million of capital through share repurchases during the quarter, leading to $114 million of authorization. For details on our outlook for the second quarter and full year 2022, please see our earnings presentation filed today. This concludes our prepared remarks. Please open the call now for questions.

Your first question comes from the line of Mark Marcon with Baird.

I'm wondering, can you talk a little bit more about what you're seeing in terms of the centralization of offices that you initially started up in Chicago and Dallas, and the progress that you're making in terms of the rollout in half of the markets that you discussed last quarter?

As a reminder, the future state model for the service centers involves significantly more hours of coverage going from 60 hours to 85, less reliance on brick and mortar branch locations, significantly more local feet on the street, and essentially doubling our sales force account managers while reducing non-client facing roles. We're making good progress. We're excited about how the service center pilots are coming along. As we mentioned earlier in the prepared remarks, we expanded the Chicago and Dallas pilots to Houston and rural Illinois, we've also expanded to include skilled trades, and then we've rolled out a virtual service center as well for Baltimore and Washington, DC. In terms of what's going well, the client feedback has been very strong, both for local and our national accounts. The number of client site visits that our teams are making is way up, the number of safety visits we're making is way up to make sure that we're placing workers in safe environments. And we’re seeing that in our safety metrics are improving across the board in the pilot locations versus the branch compare. JobStack usage is up in the service centers versus the compare group. And one of the interesting findings that we've had is in the virtual service center turnover is orders of magnitude lower than in the branch model or in the centralized service model, which has some pretty significant downstream implications that are favorable. In terms of what's not going well, we're operating on our current technology, which was built for branch delivery, not a centralized or a virtual model. So we're having to do a lot of work around until we get the end state quality and system put in. The other thing that's been a little surprising, and we thought the turnover would be quite a bit lower in the centralized locations versus the branches, and that's not been the case. We've only seen that in the virtual model so far. In terms of kind of where we're headed, there are a couple of open items that we're still working out. One of them is what the dominant model will be. Will it be a physical set of service centers or virtual service centers or some combination of the 2? And we’re still working that one out. And then the other open item is, as Derrek mentioned in his prepared remarks, we're upgrading our technology, particularly our front office system, and the timing of that is in the first quarter of next year. So we're trying to sort of time out what's the best way to roll out the centers with the new technology or roll them out prior to the new technology. And so those are some of the open items, but the headlines are really encouraging, and we've had a lot of learnings. And obviously, since we're expanding the pilots, we're pleased with the results.

Yes. I mean, obviously, you're pleased with the results. Can you give us a sense for like what the rate of improvement or rate of growth has been in Dallas or Chicago relative to the rate of improvement that you've seen in the markets where you haven't implemented the pilots?

Well, I appreciate the question, Mark. We're not going to get into the details of the various metrics that we're tracking. We're just going to keep those to ourselves for competitive reasons.

Okay. But I mean it would stand to reason that they're clearly doing better, no?

Well, I'd say this in some cases, yes, and in some cases, no. I'll just leave it at that. We've had some cases where it's very encouraging and others not as much.

All right. And then with regards to PeopleScout, continue to do really well there. You mentioned leisure and hospitality, the specific clients that you have there that are seeing a surge. Any reason to believe that, that surge doesn't continue in the near term? Because certainly listening to some of your clients in leisure and hospitality, they're basically saying that they're seeing some pretty big increases. So I would imagine staffing remains a big challenge for them.

Well, it does. There's a lot of catch-up that had to go on in the back half of 2021, and that continues. We're really encouraged with PeopleScout right now. You saw the growth rate of 76% in Q1. We think Q2 is going to be a very strong quarter as well. The other dynamic that comes into play is we're seeing a lot of health care companies interested in recruitment process outsourcing. When you look at our wins that we've had in recent quarters, it's been disproportionately tilted towards health care, a little bit in transportation, retail, hospitality, but health care has really been a hot area. And we're excited about that because that's typically first-time buyers. You don't see a lot of health care providers that had RPO engagement. So we're seeing a lot of first-time buyers, a disproportionate number compared to historical averages, and the pipeline is very strong. So we're feeling very good about PeopleScout and not just the hospitality piece of it, but the entire portfolio of clients.

Great. And then the last question, and then I'll jump back in the queue. Can you talk a little bit about your commentary about the second half of March, just how widespread is that? Is it primarily just basically due to the retail clients that you mentioned with the special projects kind of coming off? Or is there something that's a little bit more widespread?

Yes, I'm going to let Derrek take that one to start, Mark, and I'll add some specific color. But Derrek, why don't you go ahead and take that one?

Sure. Hi, Mark, thanks for the question. Yes, looking at the larger picture, we typically see about an 8% increase in our second quarter compared to the first when we consider the five-year average. However, current trends indicate only about a 4% increase, mainly due to the situation with PeopleReady. Half of this decline comes from the retail sector, which has been performing strongly overall, despite some seasonal project work that won't carry forward, as we mentioned in the fourth quarter. Retail is still doing fairly well. Additionally, if we analyze the last two weeks of March against the first two weeks, we noted a broad consistency across various industries, with some minor fluctuations averaging approximately 2 points of the 4-point decline discussed. The positive aspect is that April has shown growth as anticipated compared to late March. While we haven't fully recovered our expected weekly run rate from the latter half of March, everything remains consistent. Notably, there has been no sign of weakness or slowdown in our PeopleManagement or PeopleScout segments; both are performing well. If this trend continues, we anticipate revenue growth of about 10% to 12% year-over-year for the second quarter.

Your next question comes from the line of Jeff Silber with BMO Capital Markets.

This is Ryan on for Jeff. While it doesn't appear your business is seeing an upcoming recession, the market is a little bit more pessimistic. What time do you look for in your business to gauge a potential cyclical downturn?

Well, I'll go ahead and start off here, Patrick, you can take some as well. In staffing businesses, I think most would probably say some of the factors they look at are their own business. We've taken a look at a lot of different aspects of the economy, and we could go down a list of a lot of the common ones that you’d take a look at. I think this time around, we've all, of course, got our eyes on inflation and what the Fed's doing with interest rates. So we're not sure really where this goes. We've got a pretty experienced management team across the company that knows how to respond well to ebbs and flows, and this might just be more of an ebb and flow of how the economy trends itself out from here. The other thing that we're taking a look at as we're planning the business is there's still 11 million jobs open in the country, and we're just not seeing anyone that has any opinion that that's going to go away anytime soon. Most of those jobs are blue-collar oriented, lower pay rate jobs. That's what we do really well. So we think our business has still got some legs here. But we'll take a look and see where things go economically, and we'll play the cards that we get dealt and still we can make the right adjustments that are needed depending on where the economy goes.

Ryan, I'll just add a little color on that. This is Patrick. Clearly, there's a lot of uncertainties when we talk with clients around supply chain, inflation, worker supply and worker pay rates, geopolitical issues, lockdowns in China, the list goes on. But with all those caveats, the labor market remains very tight. So the demand is there. And one of the things that I look at is what clients are doing with their purchasing patterns. And if you look at our year-to-date wins, they're up quite a bit. So people are still going out and purchasing RPO deals and large onsite deals and projects. And so the labor market is very tight. Having said that, though, there are some projects that have been pushed out. You look at our alternative energy business. We had $12 million of business pushed out of Q1 and into the back half of 2022. And it was mainly due to supply chain issues. So there's definitely some uncertainty but overlay that with the tightness of the labor markets and it feels like that demand is still very strong.

Got it. And as a follow-up, what drove the revision in the gross margin guidance? Are you seeing less of a headwind on that workers' comp expense.

Are you referring to our annual outlook?

Yes, I was.

Well, a couple of things. One, our bill pay spreads are still doing really well, continuing to show really strong, maybe a little bit less headwind on the workers' compensation, but you take where the revenue trends are headed, both for PeopleReady and for PeopleScout. There's also a mix benefit that's coming into play here as the gross margin for both of those businesses is higher than PeopleManagement, and those 2 businesses are growing at a faster clip.

Your next question comes from the line of Kartik Mehta with Northcoast Research.

Patrick, you talked a lot about JobStack and obviously, that app is doing really well. I'm wondering, if you look at your absenteeism in JobStack versus the core business, what kind of difference are you seeing? Is there a difference or in this current environment, is it the same?

First, regarding absenteeism, we experienced a slight increase when Omicron significantly impacted us. In December, January, and February, many employees were either calling in sick or not showing up at all. However, absenteeism has since returned to more typical levels. One advantage of JobStack is our effective in-app marketing to workers, which includes incentives, nudges, reminders, and confirmations, and we have observed positive results from these efforts. While I don’t have exact figures on positions filled through JobStack compared to other methods, I can say that the trend has been positive for both PeopleReady and PeopleManagement. Additionally, our fill rates have shown a mixed performance in PeopleManagement, where we are returning to historical norms, currently around 90%. Conversely, PeopleReady hasn’t experienced as significant an increase, likely due to the temporary nature of assignments, maintaining fill rates in the low to mid-60s. Without JobStack, our situation would be much worse, as it significantly contributes to our fill rates, and all those nudges, reminders, and confirmations are likely having a positive effect as well. I just don’t have the specific numbers at this moment.

Patrick, I wanted to follow up on your and Derrek's comments regarding the slight slowdown in the second half. You mentioned 11 million job openings and your clients still needing workers, but there was a slowdown in the latter half of March. I'm trying to understand your statements better. Is it that business is being delayed, or do you believe your clients have adapted to this environment and have stopped searching for new hires?

Well, we did some digging into specifically where we saw the ramp not happen as it typically has? Or some of the retail roles that didn't quite come on as fast as we had thought. And there's a couple of themes that we found. The first one was definitely supply chain-related. There were several clients around lack of materials and delays and things of that sort that didn't ramp to the same degree that they have in the past. We had one situation where a client had been doing a lot of construction. It was a retail client. And that construction got halted because of material shortages. And so, a lot of the people that we had on billing came off billing for that particular client. And then in another instance, we saw clients shift their mix of full-time and temporary resources to tilt heavier towards full-time resources because they thought it would create a more attractive value proposition for some of their workers, and they have the confidence that they were going to need those workers long-term. So they shifted their mix from temp to full-time. So it's a little bit of a supply chain issue and a little bit of shift mixing from temp to full-time were the primary reasons that we saw in the retail space.

Perfect. And just one last question. Just on your share repurchase. Is this more than you had anticipated going into the year? Or is this kind of in line with what you were expecting to get completed by now?

This is Derrek. I'll take that one. This is about where we expected. Our share repurchases last year were minimal due to our obligations for working capital and repaying payroll taxes that we deferred under the Cares Act. However, looking back at our history, $36 million is roughly in line with our average and sometimes even exceeds it. The business is performing well with strong cash flows. We have no debt and no significant investments pending, so this is right in line with our expectations. It's possible that this won't be the last purchase we make. Additionally, this will be included in our 10-Q filed today, where we also reported an additional $13 million repurchased under a 10b5-1 plan as we entered the quarter. This brings our total repurchases for the year to nearly $50 million.

Your next question comes from the line of Marc Riddick with Sidoti.

I would like to know more about worker availability and supply. Could you provide some insight into the pace and timing of what you observed? Additionally, is there anything you believe will carry over into the second quarter, and how should we view this from a broader perspective?

Yes, Mark, are you referring to the last couple of weeks in March that we commented on at PeopleReady?

I believe so, yes. Yes.

Yes. Derrek, do you want to maybe start with that one and then I'll add some commentary around worker supply.

Yes. So Marc, was the question about worker supply in those weeks or just in general?

Right. I was asking about worker supply in those weeks. Just okay. Basically in that and then if there was any kind of read-through or anything about it that might be predictive at all?

I'll begin here and then Patrick can chime in. Regarding worker supply, we haven't noticed any contraction; in fact, it seems to be expanding a bit. We mentioned this during the fourth quarter, feeling that our business was significantly affected by some government stimulus. Many of our employees prefer not to work full time and make choices based on their financial situation. So, I wouldn't say this reflects the overall supply in the broader economy, but our supply remains strong. For instance, compared to the average number of applicants we had in December, we saw an increase of about 1,000 applicants per week as we moved into the first quarter. Therefore, we've not experienced a reversal in trends concerning worker supply; if anything, it has improved. Patrick, do you have anything else to add?

Yes. I want to emphasize that supply continues to improve. Our applicant growth increased by 20% in Q1, and the weekly trends over the last six weeks show strong applicant numbers, leading to more hires. We are successfully moving more people through the process. Our unique worker count rose by about 9%, primarily due to the new hires we've made. We do not feel that supply is decreasing. The recent pullback was more about demand issues with several clients, including a few large ones, rather than a reduction in supply.

I understand. I was curious if you could elaborate on the commentary regarding PeopleManagement and the ongoing strong demand. Additionally, could you discuss the availability and whether there's a chance to increase that through overall training activities or similar efforts?

Centerline experienced a 28% increase in the first quarter, marking a very strong performance, especially in our driver business. Driver staffing is currently in high demand, similar to nurse staffing, and a key challenge is figuring out how to attract more drivers. Some companies are investing in driver training and certifications, but we are focusing on hiring experienced drivers and putting them to work. There's a significant shortage of drivers, and it's an area we are concentrating on. Derrek, do you have any additional insights regarding drivers?

No, I think you've covered it well.

Okay. Excellent. And then the last thing for me is just wondering if you could talk a little bit about the if there are any verticals that we haven't touched on yet, end market verticals that you think have the opportunity to sort of perk up demand-wise or be more demand drivers in the latter half of the year than maybe the first half of the year.

Sure, I'll address that. The trends we've observed are likely to remain strong. Retail and hospitality are particularly robust in our PeopleReady segment, along with our other divisions. Given the significant job shortages, many of these roles offer low pay. This situation is evident in retail, which has shown strong performance. Hospitality has recovered exceptionally well, with a large number of job openings available. Our business model is well-suited to cater to this demand, especially in hospitality, even though we see similar needs in restaurants. These areas are significant for us across PeopleReady, PeopleManagement, and PeopleScout. Additionally, as Patrick noted, we anticipate opportunities emerging in the medical sector from the pipeline we’re observing, which has us feeling optimistic.

I'd just add one, Marc, just the alternative energy, the building of the solar farms. A lot of those have gotten pushed out from Q4 and Q1. And when we talk with our clients, they tell us, they have secured the materials, which was the reason for the delays. And so I think you'll see a pretty strong back half for us in the alternative energy space where we've just had a backlog of installations that have been pushed out.

Okay, great. I wanted to revisit something you mentioned about client receptivity to the evolving strategy at both local and national account levels. Could you elaborate on whether you believe there's a greater potential upside for national accounts? Is there something specific about that offering that would attract national accounts more than local ones? How should we approach this?

It’s crucial for our strategy to increase the number of client-facing personnel. By essentially doubling our local team who actively engage with clients, we are seeing positive outcomes, especially when we hire the right individuals. The feedback from both local and national clients has been very encouraging; they appreciate our presence and our efforts to understand their businesses. We are focusing on ensuring a safe environment by making more safety visits than before and providing the appropriate personal protective equipment for our workers. Our safety metrics, particularly in areas where we've conducted pilot programs, show significant improvement when compared to our peers. Many clients have expressed their satisfaction with our increased presence and our commitment to engaging with their workers to enhance their experience. A core reason behind the transition to service centers is to reduce behind-the-scenes costs through automation, digitalization, and centralization, allowing us to allocate those resources to client-facing roles. You’ve highlighted a key aspect of our strategy, which is to engage more effectively with clients and drive business growth.

There are no further questions at this time. I'll turn the call back to CEO, Patrick Beharelle, for closing remarks.

Well, thanks, everyone, for joining today's call, and thanks to all the TrueBlue associates for the great work that they're doing, and we look forward to speaking with you all again on our Q2 earnings call that will take place in late July. So stay safe, everyone.

This concludes today's conference call. Thank you for joining. You may now disconnect.