TrueBlue, Inc. (TBI) Q3 2026 Earnings Call Transcript

Greetings and welcome to the True Blue third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I want to remind everyone that today's call and slide presentation contain forward-looking statements, all of which are subject to risk and uncertainties, and management assumes 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 SEC filings, could cause actual results to differ materially from those in the forward-looking statements. Management uses non-GAAP measures when presenting financial results. You are encouraged to review the non-GAAP reconciliations in today's earnings release or at TrueBlue.com under 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, a copy of The company's prepared remarks will be provided on True Blue's investor website at the conclusion of today's call, and a full transcript and audio replay will be available soon after the call. Joining us... Today, on today's call, our Chief Executive Officer, Taryn Owen, and Chief Financial Officer, Carl Schweitz. It is now my pleasure to turn the call over to Taryn Owen. Please go ahead.

Thank you, operator, and welcome everyone to today's call. We outperformed in the third quarter, exceeding expectations for both revenue and profitability as our strategic focus on in-market expansion continues to produce meaningful results. While recovery trends vary across verticals, geographies, and services, we are seeing improvement in areas that are well aligned with our strategic positioning. We delivered our fifth consecutive quarter of top-line growth with increased operating leverage, driven by strong execution and skilled verticals, and continued growth in our core on-demand business. These results reflect the progress we've made in advancing our strategic priorities as we continue to expand in attractive markets, strengthen our sales model, and drive efficiency through technology and operational discipline to deliver long-term growth and margin expansion. Our focus on higher growth verticals continues to deliver positive results. We doubled our revenue in the energy sector this quarter, marking a sixth consecutive quarter of growth, while our commercial driver business grew for the 11th consecutive quarter. This sustained growth is a testament to the strength of our market position and differentiated capabilities as we continue to capture demand in skilled verticals with powerful growth drivers. Structural labor shortages and growing secular forces, especially in the energy space, signal further growth potential, particularly as we expand in adjacent subsectors. The government and healthcare verticals also represent attractive long-term growth opportunities. We are making notable strides in diversifying our revenue mix and expanding in in-markets where demand is supported by ongoing labor needs. We continue to build momentum and strengthen our position in these target markets with our specialized expertise, recruitment agility, and sophisticated technology. Strengthening our sales function is a key component to our growth strategy, and we are seeing tangible results from our focus here. Trends have improved across our portfolio, most notably in our on-demand business, where we have strategically invested in sales resources to expand our reach in priority markets. All operating regions for our on-demand business delivered growth this quarter, a clear reflection of the breadth and effectiveness of our investments in this area. This increased sales capacity enables more targeted, localized sales strategies and deeper client engagement. Our sharpened sales focus combined with our territory-based operating structure positions us well to drive further growth. Enterprise-wide partnerships and cross-selling initiatives are allowing us to better leverage the full breadth and strength of our workforce solutions. This strategic focus unlocks new client channels and more opportunities to deepen and expand existing relationships. Our ability to deliver a broad range of solutions across our customer base with our multi-brand platform serves as a practical growth advantage as we continue to strengthen our sales model and capture demand. Our proprietary technology platforms enable us to extend our reach while driving operational efficiencies. Continuing our digital transformation remains a priority to deepen engagement and support scalable growth. We are elevating the capabilities of our digital ecosystem to deliver smarter and more personalized solutions for our customers and talent while improving operational leverage as we accelerate growth. As we advance our strategic priorities to grow the top line, our cost, discipline, and focus on operational excellence are delivering improved bottom line results. During the quarter, we reduced total operating costs as revenue grew double digits, and all three segments delivered increased profitability with expanded margins. Our efforts to manage costs, drive efficiencies, and leverage technology to scale are producing results and position us for further margin expansion as we continue to execute on our growth strategies. Our results this quarter underscore the progress we are making against our strategic priorities and the momentum building as our strategy takes hold. Our continued focus on enhancing our sales model, expanding our share and attractive in markets, and unlocking efficiencies with technology and operational excellence underpins our commitment to realizing long-term value for our shareholders. We are encouraged by our early progress and know that realizing the full potential of our initiative will require continued financial and operational discipline. We are not yet satisfied. There is more work to do, and we are confident our strategy positions us well to capitalize on the opportunities ahead. I will now pass the call over to Carl, who will share further details around our financial results and outlook.

Thank you, Karen. Total revenue for the quarter was $521 million, up 21% and exceeding the high end of our outlook range as our skilled businesses outperformed expectations, with strong demand in the energy vertical driving high double-digit growth for the quarter. As our teams continue to capitalize on high demand and skilled verticals, we are encouraged to see broader demand trends stabilizing and our strategic sales focus taking hold. In fact, all three segments reported growth for the quarter, reflecting solid momentum as we close out the year. Gross margin was 20.5% for the quarter, compared to 22.7% in the prior year period, primarily due to the anticipated changes in revenue mix with outsized growth in attractive people-ready energy work. As a reminder, the underlying margin for energy work is consistent with other large people-ready accounts, but the pass-through travel costs result in lower reported gross margin. From a dollar's perspective, this outsized growth is driving favorable results with total gross profit for the quarter up $9 million. We successfully reduced SG&A by 3% while driving revenue growth of 21% for the quarter. This improved operating leverage demonstrates our operational discipline and commitment to delivering enhanced profitability. We have made significant progress and continue to effectively manage costs, drive efficiencies, and create greater flexibility to scale, positioning us well to deliver strong incremental margins as we continue to advance our growth strategy. We reported net income of $9 million this quarter, compared to a net loss of $2 million in the prior year, driven by strong revenue growth and improved operating leverage we assessed. Adjusted net income was $11 million, up from $1 million in the prior year. And adjusted EBITDA was $21 million for the quarter, up from $11 million in the prior year. Now let's turn to our segments. People Ready revenue grew 34%, largely driven by the outperformance in our energy vertical. Revenue in the energy sector doubled this quarter as our team continues to leverage our strong market position and deep client relationships to capture demand in this high-growth market. Overall demand in skilled verticals has continued to rise, but as a reminder, the timing of energy work can fluctuate, so we expect some of the larger project volumes in the quarter to normalize as we close out the year. While we continue to outperform in skilled markets, trends are also improving in our on-demand business, which grew for the second consecutive quarter as we continue to increase our sales capacity and expand our reach. As Taryn mentioned, we saw growth across all of our on-demand operating regions, and we continue to see the strongest results in our local business, where we've invested in resources to strengthen our sales model. PeopleReady segment profit more than doubled this quarter, with margin up 270 basis points, driven by targeted cost actions and improved operating leverage as revenue increased. Depot management revenue grew 2%, with continued growth in commercial driving services, partially offset by lower on-site volumes. Our commercial driver business delivered its 11th consecutive quarter of growth, leveraging strong client relationships and deep expertise to capture share. While on-site client volumes decline for the quarter, momentum is building with over $50 million in annualized new business won in Q3 alone. These wins, combined with increasing order volumes from our commercial driving clients, position us well for further growth as we close out the year and head into 2027. People management segment profit margin was up 100 basis points due to disciplined cost management actions that drove improved efficiencies and greater scalability. People Solutions revenue grew 1% as demand trends continued to stabilize. While broader market conditions continued to curb hiring volumes, trends improved each month with a return to growth in September. Our continued success in new business wins and customer expansions positioned us well to accelerate growth as clients' hiring volumes returned. People Solutions segment profit margin was up 60 basis points, driven by deliberate cost actions to deliver efficiencies and improved profitability. Now let's turn to our balance sheet. We finished the quarter with $20 million in cash, $102 million of debt, and $66 million of unused borrowing capacity, resulting in total liquidity of $86 million. During the quarter, stronger-than-anticipated revenue growth drove an increase in working capital of $35 million, while our expanded profitability led to an improved leverage ratio, demonstrating the strength of our operating model in driving financial flexibility. We expect to return to free cash flow positive as working capital normalizes and we maintain our cost discipline, selectively investing where we see the greatest opportunity to drive growth. With our strong liquidity position and financial foundation, we are well positioned to capitalize on the growth opportunities ahead. Looking ahead to the fourth quarter, we expect revenue growth of 20% to 24% year-over-year, with improved trends across all three segments as we continue to build momentum and execute on our strategic initiatives. We expect steady sequential gross margin and effective cost management to continue driving improved year-over-year profitability. Additional information on our outlook can be found in our earnings presentation shared on our website today. Before we open up the call for questions, I want to turn it back over to Taryn for some closing remarks.

Thank you, Carl. As you've heard today, we're making meaningful progress against our strategic priorities, and that progress is translating into results. We are strengthening our sales model, expanding in markets where we see the greatest potential, and using technology and operational discipline to become more efficient and effective. These efforts are helping us strengthen our value proposition, deliver profitable growth, and create long-term value for our shareholders. We are confident in our strategy, energized by our momentum, and encouraged by the opportunities ahead as we maintain our strategic focus and advance our mission to connect people and work. This concludes our prepared remarks. Operator, please open the call now for questions.

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 queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question today will come from Clayton Lovell with North Coast Research. Please go ahead.

Hey, guys. This is Clayton Lovell stepping in for Cardic Meta today. Congratulations, first of all, on a strong quarter. Results obviously came in well ahead of your guidance on both the top and bottom line. And, you know, just in addition to the operational discipline you guys exhibited, can you just walk us through what came in better than you expected and how much of that improvement is maybe due to the market forces versus actions you're taking and what are you doing to drive these results generally?

Hi, Clayton. Thank you for the question. We're certainly encouraged by what we're seeing in the market, but I'd say the bigger story is that our strategy is working, and not just this quarter. We've now delivered five consecutive quarters of growth. We've been deliberate about focusing on attractive, high-demand-end markets, and that's paying off. All three of our segments grew and expanded margins this quarter. The investments that we've made in our sales force, both in People Ready On Demand territories and across each of our business units, are delivering measurable results in both growth and profitability. And our People Ready On Demand business posted its second straight quarter of growth. We grew our customer count sequentially, and our newer sales representatives are gaining real traction in their markets, and we expect for that contribution to continue to build over time.

Just to add on to that, Clayton, the upside versus our guidance came largely from energy project work in geographies that carry higher bill rates, and weather really wasn't a factor this quarter. Just as a reminder, revenue can be uneven across reporting periods, really due to timing, cadence of project starts, weather-related delays, and shifts in our customers' project schedules. But it's just as important to note what happened to the bottom line. We reduced SG&A even as revenue grew about 21%. So a significant portion of that top line upside, it flowed straight through, driving strong incremental margins for the quarter. You know, as we look forward to the fourth quarter, our outlook reflects the higher bill rates we've been seeing, but also factoring in the holiday and weather impacts we typically see this time of year. Importantly, kind of with the cost structure we built, we're really well positioned for further margin expansion as we continue to grow.

All right. Thank you both for the answers, and congrats once again. Thanks, Clayton.

Thanks, Clayton. And next, we'll move to Mark Riddick with Sudati & Company.

Hey, good afternoon.

Hi, Mark.

Hey, Mark.

So, I wanted to start, maybe we can start on the rates. Maybe I missed that, but maybe talk a little bit about the bill rate, pay rate, what you saw in the quarter, and then maybe then we can shift over to the sales team investments.

Yeah, thanks, Mark. I'll give these excluding renewable, kind of the energy work that we've been discussing in the past. Our pay rates rose about, you know, 1.2%. Bill rates were up about 0.4%. That spread drove about a 10-bit decline in margin and really reflects kind of the more moderate wage pressure across our core on-demand business. We are seeing that higher pay rate and bill rate increases driven by our mixed shift towards the higher wage energy work. Where we have specialized skills trades that are more scarce than the command premium pay. And then I'd also say that the more important point on this one is really about the profitability. Those higher skilled roles that drive those pay rate increases, they're more profitable per assignment, even though they carry a lower reported gross margin percentage, which is why you saw both gross margin dollars and EBITDA grew year over year, despite the decline in margin percentage. You know, from a pricing perspective, I'd say pricing pressure remains as we'd expect in this environment, but we continue to stay disciplined on price while holding the competitive position we have in the market.

And then maybe you can talk a little bit about, because as mentioned earlier, and I'll echo the sentiment, certainly the revenue number and the guide for 4Q is well ahead of where at least I was. Anyway, I can't speak for anybody else. But maybe you can talk a little bit about sort of how the pacing went through the quarter and how that plays into your 4Q total revenue guide. And then I'll get the shift over to the new sales contributions.

Yes, I'll take that one, Mark. So Q3, yes, grew 21%. It was well above the, you know, high end of our guidance range. Really, as our growth initiatives continue to yield strong results, you know, building on that momentum, our Q4 guide is, you know, between 20 and 24%. That implies at the high end, segment growth of, call it 37% for people ready, 9% for people management, and plus 6% for people solutions. From an inner quarter perspective, Mark, people ready revenue trends really improved throughout the quarter. It was driven by continued strength in our skilled businesses and a second consecutive quarter of growth and on demand. Our people ready business exited Q2 around plus 30%. We accelerated to exit Q3 at plus 42%. And people management really improved from plus 2% in Q3 from flat in Q2. And then I just say from an October trends perspective, they've been really similar to how we've exited the quarter. And, you know, our outlook really reflects the typical seasonal step down we'd see in Q4, and includes some of the impacts of holiday and weather, particularly in our people already skilled businesses. So even with that kind of seasonality factored in, our guide implies, you know, continued strong year over year growth of those, you know, 22% at the midpoint.

Great. And then you made mention in your prepared remarks, Tyron, about the strength of energy and the like. Maybe you talk a little bit about maybe some of the other verticals that either surprised in performance or outperformed, or maybe we could talk a little bit about some of the other verticals that contributed to the top line gains and maybe what you're expecting, how that plays into the 4Q guide.

Yeah, thank you for the question, Mark. Our, you know, I would say that in our people ready on demand businesses, as we've discussed, we made investments in sales, local sales in the territories, and they're delivering measurable results, improving both growth and profitability across the people ready on demand organization. So that's promising. We saw stronger performance in our local business this quarter, driven by those sales investments, and we're seeing some nice sales As those newer sales representatives gain traction in their markets, and we expect that contribution to continue to build over time. So that's really good news in our People Ready On Demand business. I'll just comment on a couple of other wins that we had this quarter. We mentioned in prepared remarks that OnSite had one of its strongest quarters for new wins in many years, With that annualized wind volume more than doubling year over year. So that was good progress. People Ready Skilled Trades secured a new win with a defense manufacturer and a steel products manufacturer. And People Scout had a win with a leading energy company during the quarter as well, expanding our presence in that market in our People Scout business.

Excellent. So, very strong quarter. Very nice to see. Congrats.

Thank you, Mark.

Thanks, Mark.

And as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. And next, we'll move to Alex Sinatra with Baird.

Hi. On for Mark Markham today, and congrats on the quarter. You mentioned building momentum and on-site wins and expansions and people management. I was just wondering what kind of engagements are providing that progress and when those wins should start contributing to growth.

Yeah, thanks for the question, Alex. So, yeah, we had a really strong kind of, you know, quarter of wins in there. We'd expect for our on-site business to start to contribute growth here in Q4, as is included in our guide, and see a strong 2027 with the wins that we've had there. I would say our wins cover the spectrum. As you remember, kind of from an on-site perspective, about 50% of the end markets sit in manufacturing. We also do distribution and transportation clients as well. And it was, I would say, kind of across all the portfolio from where we saw wins. There wasn't a specific vertical that we saw more wins in. It was kind of spread through the typical distribution that we see in that business.

Gotcha. And then, obviously, SG&A management has gone really well. I'm just wondering how that is trending going into Q4 and into 27. You know, how much more leverage there is to get there and how much excess capacity you might have. It sounds like you're adding, so maybe not, maybe leading into growth. Just some more detail on that, please.

Yeah, so we're guiding to a midpoint of $92 million, which is down about 3% year over year. That includes about $2 million of adjustments. So on an adjusted basis, let's call it SG&A of $90 million. That is up about 1%. The 1% increase really reflects kind of higher performance-based compensation. I think bonus incentive costs tied to our strong results, not necessarily growth in our fixed cost base. So Q3 really shows the leverage in our model. Revenue grew 21%, while adjusted SG&A fell 2%, and our adjusted EBITDA margin expanded about 150 basis points. With Q4 revenue up, you know, guided to between 20 and 24, We continue to see those, you know, strong incremental margins as we've talked about. From a going forward perspective, we're going to remain disciplined in managing costs. It's core to how we operate. Our work to optimize our fixed cost base and enhance the digital capabilities lets us support growth while protecting our margins. And we're going to continue to invest selectively where we see the best opportunities to drive growth. I'd say, you know, technology is a big part of this. Our digital platforms have. Allowed us to handle more volume with a leaner team, and we're continuing to drive improvements on both revenue per employee as well as an adjusted gross profit per employee. Gotcha. Thanks so much. Have a good night.

Thanks, Alex.

There are no further questions at this time. I would like to turn the floor back to Taryn Owen for closing remarks.

Thank you, Operator, and thank you, everyone, for joining us today. I want to take this opportunity to thank the entire True Blue team for their tremendous efforts and commitment to executing on our strategy and advancing our mission to connect people and work. We look forward to speaking with you at upcoming investor events and on our next quarterly call. If you have any questions, please don't hesitate to reach out. Thank you.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.