TrueBlue, Inc. Q1 FY2023 Earnings Call

Greetings, and welcome to the TrueBlue First 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derrek Gafford, Chief Financial Officer. Thank you, Derrek. You may begin.

Good afternoon, everyone, and thank you for joining today’s call. I’m joined by our Chief Executive Officer, Steve Cooper; and our President and Chief Operating Officer, 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 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. Okay. Let's turn the call over to Steve.

Thank you, Derrek, and welcome, everyone, to today's call. Given the macroeconomic climate, we are pleased that demand for our services was right in line with our expectations. Our PeopleReady business is one of the first to feel the impact from a change in macroeconomic conditions, given the short duration of job assignments and the project-based nature of its services. After experiencing the first signs of slowing demand during the second quarter last year, the underlying revenue trends at PeopleReady have been steady since October. As we expected, our PeopleScout and PeopleManagement businesses followed suit, with slower demand trends during the first quarter this year as some clients trimmed their human capital spending due to macroeconomic uncertainty, despite many clients having open positions. This led to overall revenue of $465 million, down 16% compared to Q1 2022. Because these anticipated trends, the PeopleScout and PeopleManagement teams were proactive in taking swift action late in the quarter to reduce costs, ensuring the operating structure was more in line with demand. Our teams were also able to maintain pricing discipline throughout the quarter and deliver another quarter of positive bill/pay spreads in our PeopleReady business. Turning to the segments. PeopleReady is our largest segment. It represents 56% of total trailing 12 months revenue and 57% 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 supported by our JobStack mobile app. Revenue for the quarter was down 17%. As a reminder, in the first quarter of 2022, PeopleReady benefited from a demand surge across the business as our customers were in desperate need of labor during the post-COVID recovery, creating a year-over-year headwind. Setting this factor aside, our sequential revenue trends remain consistent with typical historical patterns. PeopleScout is our highest margin segment, representing 14% of trailing 12-month revenue and 33% of total segment profit. PeopleScout revenue declined 15% in Q1 as a result of a reduction of permanent job openings at our clients. We have seen some clients slow hiring while others have paused activities altogether. PeopleManagement represents 30% of trailing 12 months revenue and 10% of total segment profit. PeopleManagement provides on-site industrial staffing and commercial driver services in North America. The essence of a typical PeopleManagement engagement is supplying an outsourced workforce that involves multiyear, multimillion-dollar on-site or driver relationships. Revenue was down 13% in Q1. We have seen less volume at the e-commerce warehouses for our on-site retail clients as consumer spending patterns have shifted. Now, I'm going to spend a few minutes talking about our strategies. Our strategy at PeopleReady is to digitalize the business model to gain market share, improve efficiency and take the friction out of each step of the transaction with associates and customers. The United States temporary day labor market is highly fragmented and primarily made up of smaller competitors in the industrial staffing segment where PeopleReady operates. This market is also less complex than other types of staffing and has the best opportunity for digitalization. Our smaller, more regional competitors lack the ability to invest in digital applications like JobStack. When combined with our expansive brick-and-mortar branch network, we are a one-stop shop for national and local accounts, making us a leading provider within the on-demand industrial staffing market. At PeopleScout, our aim is to capitalize on a strong service reputation and ability to hire in high volumes to gain market share within the RPO industry that has consistently produced double-digit annual revenue growth in favorable economic conditions. PeopleScout is a market leader in the RPO space as a result of its people and Affinix, our recruiting platform. Both enable us to place better talent faster in all types of market conditions. As we move forward, we plan to target new high-growth sectors for us, such as life sciences and technology. Our positive track record of penetrating healthcare, depth of experience, and our technology makes this possible. PeopleManagement’s strategy is to supplement our traditional on-site staffing services with higher-margin product offerings like on-site workflow solutions and commercial trucking as well as expand geographically within the United States to increase market share. We believe we are positioned well for a strong recovery as we serve customers in some of the fastest-growing segments, and we have taken the proper steps to be nimble, yet strong in our preparation to be the supplier of choice in connecting people and work. Now, I'll turn the call over to Taryn, who will discuss specifics on some key priorities this year.

Thank you, Steve. From a big picture perspective, this quarter provided a solid proof point for the value of our flexible business model. We struck a careful balance between ongoing investments in our people and technology and cost actions to align with client demand. At PeopleReady, the investments in our people are paying off. First, we have made a concerted effort to maintain staffing levels in the field. In addition, we have enhanced our sales training with the on-demand business and have embedded account managers to cover new markets within skilled trades. These tactics are playing a key role in the steadiness of our underlying revenue trends. At PeopleScout and PeopleManagement, we have leveraged our scalable model to align with lower hiring activity from our clients. We scaled down with agility late in the first quarter in an effort to bring our cost structure in line with demand. And just as we did during the COVID downturn, we are staying extremely close to our clients, so that when they return to expansion mode, we will be there to meet their needs and scale back up with the same urgency and effectiveness. Now I would like to provide some updates on the priorities I discussed during our last call. We are in the midst of a multi-year digital transformation. Investments in our platforms are essential and will help us better serve our clients, attract workers, and support our people. Our PeopleReady JobStack application and PeopleScout Affinix, recruiting platform enable us to provide differentiated experiences to those we serve. With JobStack, we are focused on attracting and retaining more associates by enhancing their overall experience. We are on track with various upgrades, including faster associate registration and simplifying the time entry process. These product enhancements will lead to increased client fill rates and increased associate retention, both of which will lead to higher customer satisfaction and ultimately more wallet share. Affinix is our PeopleScout recruiting platform designed to meet candidate expectations for a seamless experience. Affinix combines many facets of the recruiting process, including recruitment marketing, applicant tracking, candidate relationship management, and interviewing to quickly bring a highly qualified talent pool to our clients. As I mentioned, the flexibility of our business model is critical to our clients. The agility of Affinix fulfills this need allowing us to scale up and down to meet their hiring needs. While technology is an important business enabler, our relationships with our clients, candidates, associates, and employees are essential to our success. Our employees fulfill our mission to connect people and work each and every day. Our team has worked hard to ensure that our people have the right tools, training, and skills to meet our clients' needs, and they continue to broaden the depth of our learning and development activities with a concentration on sales effectiveness. By enhancing the team's ability to bring solutions to our clients while maintaining the appropriate staffing levels across our business, we are positioned to meet our clients' demand across all business cycles. I look forward to providing further updates on our technology and people priorities on future calls. I'll now pass the call over to Derrek, who will share further details around our financial results.

Thank you, Taryn. Total revenue for Q1 2023 was $465 million, a decrease of 16% and in line with our outlook. As we've mentioned, PeopleReady benefited from a demand surge in the prior year period, as the peak of the post-COVID recovery left our customers in desperate need of labor. As expected, the surge did not repeat this year, contributing 9 percentage points of total revenue decline. The remaining 7-point decline reflects the company's underlying revenue trend. Given the macroeconomic climate, we are pleased to see another quarter of steady underlying revenue trends in our PeopleReady business, with weekly sequential revenue trends following typical historical patterns. As mentioned last quarter, during times of macroeconomic uncertainty, we typically see the first signs of slowing demand in our PeopleReady business due to the project-based nature of the work and the short length of job assignments, and that is exactly how things have played out over the last 12 months. PeopleReady was the first to experience slowing demand, and the PeopleScout and PeopleManagement businesses followed suit this quarter. We posted a net loss of $4 million this quarter, down from net income of $11 million in Q1 last year, while adjusted EBITDA declined to $3 million versus $23 million in Q1 last year, due primarily to the revenue decline. As a reminder, Q1 is seasonally our lowest revenue quarter, creating a more pronounced impact on year-over-year profitability. The net loss experienced this quarter is not indicative of our expectations for the remaining quarters this year. Gross margin of 26.5% was up 110 basis points. The expansion was driven by better workers' compensation results from the favorable development of prior year reserves as well as disciplined pricing in our PeopleReady business. Our PeopleReady business delivered its eighth consecutive quarter of positive spread between bill rate and pay rate inflation. SG&A as a percentage of revenue increased 450 basis points mostly due to operational deleveraging given the revenue drop, which is magnified by the first quarter being our seasonal low point in revenue. SG&A dollars increased $2 million or 2% primarily due to people investments in the PeopleReady business. As discussed on prior calls, we believe we reduced our staffing levels too low during the recession of 2020, leaving some of our PeopleReady branches without adequate resources to acquire new customers and maintain strong relationships with existing customers. Q1 headcount this year is consistent with headcount in Q3 and Q4 of last year, but up a bit from Q1 last year. While we are not planning on making additional investments in our staffing levels at this time, we do believe the people investments we made last year have had a role in maintaining a steady underlying revenue trend over the last two quarters despite economic uncertainty increasing. For PeopleScout and PeopleManagement, we've taken a different path. Revenues softened during the quarter, and we took action to reduce our costs. As a result, we expect to yield $11 million in cost savings over the remainder of 2023. About a quarter of the savings will flow through cost of services, with the remainder flowing through SG&A. Our effective income tax rate was a benefit of 13% and in line with our outlook. Now let's turn to the specific results of our segments. PeopleReady revenue decreased 17%, while segment profit decreased 95% and segment profit margin was down 500 basis points. As we've mentioned, PeopleReady benefited from a demand surge in the prior year period, which accounted for 16 points of the year-over-year decline. The remaining decline of 1 point reflects PeopleReady's underlying revenue trend for the quarter, which was roughly in line with the underlying revenue decline for this business unit in Q4 2022. The drop in segment profit and related margin came from the revenue decline and operational deleveraging, which were partially offset by lower workers' compensation expense and favorable bill pay spreads. Bill pay spreads have remained strong with bill rates up 7.9% and pay rates up 7.1%, resulting in a positive spread of 80 basis points. PeopleScout revenue decreased 15%, while segment profit decreased 19% and segment profit margin was down 60 basis points. As expected, RPO business volumes declined this quarter as clients responded to the macroeconomic environment. We've seen some clients slow hiring while others have paused their hiring activities, taking a wait-and-see approach. With the cost reduction actions previously discussed, our goal is to generate a segment profit margin of 10% to 15% over the remainder of 2023, assuming stable macroeconomic conditions. PeopleManagement revenue decreased 13%, with segment profit dropping to break even and segment profit margin was down 190 basis points. Demand declined in both on-site and commercial driving services as economic uncertainty led to lower client volumes, most notably in retail and transportation. The decline in segment profit and related margin was mainly due to the decrease in revenue and the associated operational deleveraging. Now let's turn to the balance sheet and cash flows. Our balance sheet is in great shape. We finished the quarter with $47 million in cash and no outstanding debt. The business produced cash flow from operations totaling $9 million. We repurchased $25 million of common stock during the quarter, leaving $64 million remaining under our authorization. Now I'd like to take a moment to provide additional color on some forward-looking items. We expect a revenue decline of 14% to 10% in Q2 2023, which is an improvement to the 16% decline posted in Q1 this year. The improvement is tied to a less challenging prior year comparison. One last thing before we wrap up. As a reminder, the 2023 fiscal year will have 53 weeks, which is a typical occurrence every five to six years since we operate on a 52-week fiscal year versus a calendar year. This extra week will provide incremental revenue for the year of $22 million to $27 million but will not contribute additional profit as the 53rd week is an annual low point for weekly revenue. For additional details on our outlook, please see our earnings presentation posted to our website today. This concludes our prepared remarks. Operator, please open the call for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question is from Kartik Mehta with Northcoast Research. Please proceed with your question.

Thanks. Maybe just your thoughts on what the first few weeks of April look like and maybe the trends you saw coming out of the quarter and start of the next quarter, if you saw any changes?

Hi, Kartik. It's Derrek here. So let me just touch on that question for the quarter, the monthly trends, and maybe then I'll just ease into April to bring them both together. So the monthly trends in Q1 were very similar to the 16% decline. Everything was within 1 point or 2 of that. So not much volatility in that, and we finished right around that level. Going into April, the year-over-year decline at PeopleReady is diminishing. That's really though all about the prior year comparison being less challenging. We've talked about the surge that we've had in our prior year comparison for Q4 and here in Q1, that gets less challenging as we move into Q2. Now that's really for the staffing side of the house. PeopleScout perspective, while we haven't posted our revenue here in Q2, we bill monthly. One thing that I will bring up is we do expect the year-over-year decline to increase for PeopleScout. It's less about the sequential revenue dropping off more, although there might be $2 million or $3 million. It's more due to Q2 of last year was a record quarter for PeopleScout everywhere, both in revenue, bottom line dollars, the segment profit margin of 23% was a high point. So that's providing a more challenging comparison across a few fronts, most notably on the revenue line. So you might see PeopleScout edge up closer to a 25% decline in Q2.

And then, just from your perspective, as you look at your end markets, what differences you're seeing in the end markets, if any?

Sure. Well, there's probably 2 or 3 high points and some low points, I guess, if you could call it here, depending on your take given the environment. Probably one of the biggest movers for us was in the area of retail. The retail business for us is down 40% year-over-year here in Q1. The majority of that is about the prior year comparison. We had a lot of projects in this surge that we had in the prior year period at PeopleReady, a lot of it had to do with retail. That said, there is a little bit of softening in the run rate with retail as well. While retail spending on the consumer side is actually holding up pretty well, if you talk to our customers, the main thing where we're seeing some slowdowns in retail, it's really about inventory levels, which I think is pretty consistent with the increase from a broader perspective on inventory levels across the United States. So that's on the manufacturing and the retail side. A high point is our energy business. Our energy business, renewable energy business is up about 45%. That's a business that is about an $80 million run rate and increasing. It's one that we're very excited about and bullish about. So maybe I'll turn that one over to Taryn and give you a little bit more operational color on that business unit.

Sure. Thanks, Derrek. Certainly, the government incentives that were put in place this year have helped fuel some opportunities for us in the renewable energy space, particularly within solar farms. We are a leader in this space with over a decade of experience. But when we start to look at our new business wins and the pipeline that has been growing here, we've got just a tremendous pipeline. It's grown 10 times over prior year, and our RFP volume is really healthy. We're responding to over 10 opportunities each and every week here as we exit Q1. So we're really bullish on this opportunity for PeopleReady.

And Derrek, just one last question, as you look at trying to right-size the business, we make cost cuts, I wonder how much will play into not losing quality people since it's been so hard. So do you think this time around, you might be a little bit conservative and not right-size the business as much as if it was a normal type of recession or a normal type of labor environment?

I'm glad you asked that question. When we're growing, we're investing, and when we're not growing, we're making adjustments. You saw some of those adjustments this quarter in our PeopleManagement, particularly in our PeopleScout business. Those adjustments were tough for us, but we believe they were the right choices. Essentially, when we work on cost reduction, we aim to balance the benefits of lowering our cost structure with our potential to grow long-term gross profit. In this case, the actions taken in Q1 were difficult and affected some employees, which we dislike. However, we don't think this will hinder our ability to rebound strongly in the future, regardless of whether we enter a recession. When the economy improves and grows at a more vigorous pace, we believe we won’t be held back. On the PeopleReady side, we've chosen a different approach. We haven't reduced positions there; in fact, our headcount has increased by about 120 or 130 since Q1 last year and is stable compared to Q3 and Q4. We've already cut a lot of costs in 2020, and many of those reductions remain in effect. Looking back, we realize we may have cut too much. We cannot operate branches effectively with minimal staffing; branch managers are essential. We want to ensure we're well-positioned for the long-term and retain skilled employees who understand our business and how to engage with customers. Despite our advancements in digital, this remains a relationship-driven business, and we intend to uphold that. That is our perspective on the situation.

Thank you very much for your thoughts. Appreciate it.

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Please proceed with your question.

Thanks so much. That's close enough. Derrek, you are kind enough to give us a little bit of color on the segment data in terms of revenues. I think you mentioned PeopleScout, can we get the same kind of color for both PeopleReady and PeopleManagement for 2Q guidance?

As far as what we're expecting from a revenue perspective that's embedded in the overall guidance?

Yes, please.

Yeah. You bet. So we gave ranges. I'm not going to quote ranges to you. I'm just going to go to the midpoint of the ranges and give you some numbers. So we'd expect PeopleReady to be down about 7%, PeopleScout to be down about 25%, and PeopleManagement to be down around 10%.

Okay. If you provided this information earlier, I must have overlooked it. Thank you. In the quarter, there was a benefit related to workers' compensation, which seems to be a recovery of some of the reserve. What caused this, and can you remind me when this reserve is typically updated? Is it done quarterly or semi-annually, and should we anticipate this happening regularly in the future?

We receive an independent actuary report every quarter, allowing us to closely monitor the workers' compensation reserves for the current year and the adjustments needed for prior years. We did see a significant reduction in reserves from prior years. Looking ahead for the rest of the year, we anticipate some challenges from workers' compensation. In the latter half of 2022, we provided substantial benefits, and while our gross margin is improving in Q1 this year compared to Q1 last year, we expect it to remain relatively flat for the year. This expectation is partly influenced by workers' compensation and also because we foresee bill pay spreads remaining positive but decreasing as the quarter progresses. This provides some insight into the workers' compensation situation and how it relates to our overall gross margin.

Thank you for that information. I have one more question. You have a slide that highlights the strength of your balance sheet, which is quite impressive, especially in the current environment. Regarding capital allocation, I understand you repurchased around $25 million in shares last quarter. What can we anticipate moving forward? Will you continue with similar buybacks? Are you considering taking advantage of market conditions for potential mergers and acquisitions? Any insights would be appreciated.

Yeah. You bet. Well, when it comes to capital allocation strategies, our first priority is reinvesting in the business. And we've got a healthy amount of CapEx. That's not an area that we have cut back on. And when I say CapEx, the vast majority of this is about technology. Our business and industry is becoming more digitalized all the time. We’re a leader there. We want to stay a leader in that and we’re going to stay committed to that. Both to differentiate ourselves in the marketplace and take advantage of the strong operating leverage that we’ve got, but also to increase our efficiency. So that’s job number one. Job number two would be on the acquisition side, probably less so on the staffing business side. We got our hands full with a lot of great stuff digitalizing the business and we think that’s our best return at this particular moment. This is continuing our focus there. On the RPO side, that’s a different ball game. We are interested in doing some acquisitions that would give us a greater presence in different niches of different industries to get us into more deals, win more deals and potentially some on an international basis that would increase our likelihood of winning multinational deals. And then lastly, as you pointed out here, return on capital back to shareholders is important to us, especially at advantageous prices. And we think our company right now at this particular moment is valued very economically. So we did buy back $25 million of stock. We also see when you take a look at the 10-Q in between the close of the quarter and the end of last week, we bought back about another $10 million. So that’s kind of how we see our capital priorities at this point in time, Jeff.

Okay. Thank you so much for the color.

Thank you. Our next question comes from Mark Marcon with Baird. Please proceed with your question.

Good afternoon, everybody. Wondering Steve or Taryn, can you talk a little bit more about some of the markers in terms of the digitization strategy and JobStack? And what further improvements should we see with regards to the ease for people to register and what you think that would translate to from a business perspective.

Thanks, Mark, for the question here. It's an important topic for us, taking the friction out of the transaction between our associates and ourselves, not making it so difficult. So your question is right in the middle of the bull's eye of what we think is important and what we're working on for digitization. With the customer, it's not appearing to be the most important thing, but we still want to take friction out of that transaction and help them be able to order workers as fast as possible. So let me have Taryn talk a bit more about those specifics, but I kind of wanted to chime in first to let you know that it remains our highest priority, taking this friction out of a pretty complicated process of finding a job for somebody, and we can make it easier, and we stay committed to that.

Yeah. I'll just add some color. Certainly, JobStack has allowed us to maintain constant contact with our customers and our associates and when we look at some of the enhancements that we're making, it's really around taking some of that friction out, as you mentioned, Mark, in terms of allowing associates to register for a job faster, which just really reduces the time it takes to get them on an assignment and to get paid. One of the other key enhancements we're working on is to improve the ease of time entry and approval. So again, our associates can get paid faster and be ready to take their next assignment with us. But when you think about kind of everything that we're doing in the product to enhance that experience, it's really about taking that friction out and ensuring that our associates and customers can engage with us in an effective way in the way in which they want to engage.

Can you elaborate a little bit on that, Taryn? Just like how long does it take the average person to register? What's the goal in terms of like registration speed? And then you used to give us some metrics in terms of the percentage of jobs that were filled through JobStack on the PeopleReady side, do you have any updates there just in terms of some of the typical metrics that you used to give us?

Sure. When we look at the jobs filled through the app, approximately two-thirds of all jobs at PeopleReady are filled via that platform. About 90% of our associates are using the app, and we typically have 30,000 customers engaged at any moment. This has remained quite consistent for us. Regarding registration, we aim to simplify the process, allowing associates to register and start an assignment in 10 minutes or less. The time it takes depends on the type of job and the specific pre-employment qualifications required by the customer. Ultimately, our goal is for associates to register quickly and efficiently take on jobs that meet the necessary requirements.

Great. I'm curious about your perspective on the macroeconomic situation. It's encouraging to hear that the trends for PeopleReady have been consistent with historical seasonal patterns on a week-by-week basis and are stable. What is your view on the overall macroeconomic conditions? Many national data points seem to be indicating a decline. Do you believe we have seen the worst of it, or how are you approaching this situation?

Hi, Mark. It's Derrek here. I'll take that one. If you talk to our customers, there is an increasing amount of uncertainty. Some of it is related to data points that are declining. A lot of it also stems from a buildup of negative press. Over the past 20 years, I don't think there's been a recession that has been so anticipated. There's been a lot of news, and it accumulates, impacting confidence. This uncertainty is reflected in other metrics. Looking at the latter half of last year, the economy grew at a decent rate overall, but primarily due to consumer activity. Business investment was negative, which I haven't seen in our industry during times of growth. Those are the challenges. On the brighter side, the job market remains tight. Most of our customers expect this to continue, and they are retaining their employees. This retention is boosting employee confidence, leading to continued spending. Many customers are concerned about a recession, especially given the tight labor market and their reluctance to lay off staff. Historically, severe recessions involve widespread job cuts, which negatively affect consumer spending and subsequently business investment. Most of our customers aren’t anticipating that situation. So, I’m not sure, Mark, if we’ve seen the worst of it yet. However, what we're hearing from our customers suggests that if we do experience something, most expect it to be relatively mild compared to what we’ve observed in the last two decades.

Great. And then can you give us an update with regards to the PeopleReady side, what you're seeing on the construction side?

Construction has shown some resilience. Taryn mentioned our renewable energy segment, which has been performing well, and we remain optimistic. However, looking at overall construction, excluding that area, our commercial and residential business saw a decline of 7%, which is an improvement compared to the 11% drop we experienced in Q4 of last year.

That's great to hear. And on the renewables side, how big could that part of the business get to over the next couple of years?

It's difficult for us to provide a specific number on this. However, the level of investment and incentives from last year is significant. Our pipeline continues to expand, and we have considerable experience in this industry. There have been peaks in the past, and with the ongoing reinvestment driven by available incentives, we believe this could sustain multiple years with substantial growth potential. While we can't pinpoint an exact figure, I can share that we experienced a 45% growth in Q1, and our guidance for Q2 in that segment suggests we will grow by a similar amount. Overall, what we're observing right now is promising.

That’s great to hear. Thank you.

Yeah. I'll throw on that, Mark. I can't hesitate to talk about our own preparedness, not just the size of the environment or the size of the opportunity that's growing; I don't believe we've ever been as prepared as we are for an opportunity like this. So I think you match the two up, and it's real solid.

Thank you. Our next question is from Marc Riddick with Sidoti & Company. Please proceed with your question.

Hi. Good evening, everyone.

Hey, Marc.

I want to express my gratitude for the insightful commentary shared in the presentation and prepared remarks. Could you elaborate on the bill pay spreads you mentioned and how they influence your outlook? I'm curious about your expectations for the second quarter and the rest of the year regarding bill pay spreads and their resiliency. I have one more question after that.

Thanks for the question, Marc. In Q1, the spread between bill rates and pay rates was 80 basis points, and we anticipate it to be 60 basis points for the entire year. This suggests that we expect a gradual decline throughout the year. We believe bill pay spreads will remain positive as we do not foresee widespread job cuts; if that were to occur, the situation would be quite different. The slight decrease in bill pay spreads is largely due to the current environment. The Federal Reserve has clearly indicated a fairly restrictive monetary policy, which will likely persist, leading our customers to tighten budgets further. However, we feel we’re delivering significant value through our PeopleReady business. The labor market remains tight, and we can quickly locate high-quality talent for our clients, reflected in the economics of our bill pay spreads. Looking ahead, we want to be compensated for the value we provide but also remain competitive in our pricing. We understand that market conditions will change at some point, and it’s essential that our business has the right personnel and technological investments. We don't aim to be the lowest priced option but we also want to avoid being significantly more expensive than competitors, ensuring we can seize opportunities during an economic rebound.

Excellent. And then I would be remiss to not sort of acknowledge there's been some announcements of leadership and appointments in various areas over the last few quarters as well as just a couple of weeks ago, so I was wondering if you could talk a little bit about some of those and maybe if there are other sort of key areas that may need still to be filled and maybe sort of where we are in that process because certainly, and congratulations to those who are in new roles. But I was sort of wondering sort of kind of if you're sort of toward the end of that process as far as those important leadership appointments.

Well, Marc, thank you for the question. And I know it's not an easy one to ask, but we are excited about the three promotions that were announced here a few weeks ago, all very much customer and operations-focused roles. And it really excites us to see people prepared inside, well trained, ready, been here, experienced, been in multiple positions before they were promoted. I'm going to have Taryn talk about these three roles that we just announced a couple of weeks ago. They report to her, and they're helping her meet her objectives and operations. I think it's best coming from her to talk about these three people. But yeah, it's really exciting. So thank you for the question there.

Yeah. Thank you, Marc. Really happy to talk about this. So Kristy Willis was promoted to the President of PeopleReady. Kristy has been with PeopleReady since 2018, recently serving as our Head of Sales and Operations. She brings 20 years of experience in all aspects of the staffing industry. Rick Betori has been promoted to the President of PeopleScout. Rick's been with TrueBlue since 2011 and has broad experience across our business units, both in digital transformation and in operations. He most recently served as PeopleScout Managing Director of the Americas. And then Caroline Sabetti was promoted to the Chief Marketing and Communications Officer for TrueBlue. She's been with us since 2002, and she has served as the Chief Marketing Officer for PeopleReady and PeopleScout and as the Senior Vice President of Communications for TrueBlue. So we couldn't be more excited for these three individuals or for the organization as they take on these roles.

Excellent. Thank you very much.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Steve Cooper for closing comments.

Thank you. We sure appreciate you dialing in and your questions and your interest in TrueBlue, and we remain committed to the shareholder at this point in time on these principles we've talked about today and look forward to updating you on our next call.

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