What TrueBlue (TBI) Said on Its Q3 Earnings Call

Key Points

• TrueBlue’s third-quarter revenue rose 21% to $521 million, and it swung to $9 million in net income from a $2 million loss a year earlier. Growth and improved margins across all three segments helped the company exceed expectations.
• Energy demand drove a doubling of energy-sector revenue and a 34% increase at PeopleReady, but the larger share of energy work reduced reported gross margin to 20.5% from 22.7%, partly due to pass-through travel costs.
• TrueBlue expects fourth-quarter revenue growth of 20% to 24% year over year, while cautioning that energy-project timing can vary. It expects to return to positive free cash flow as working capital normalizes.

TrueBlue NYSE: TBI reported third-quarter revenue of $521 million, up 21% from a year earlier, as demand for energy workers helped the staffing company exceed its revenue and profitability expectations.

The company posted net income of $9 million, compared with a net loss of $2 million in the prior-year period. Adjusted net income rose to $11 million from $1 million, while adjusted earnings before interest, taxes, depreciation and amortization increased to $21 million from $11 million.

Chief Executive Officer Taryn Owen said TrueBlue recorded its fifth consecutive quarter of revenue growth, with all three segments reporting higher sales and profit margins. She attributed the results in part to investments in sales, expansion into higher-demand markets and efforts to control costs.

Energy work lifts revenue, weighs on reported margin

Revenue in TrueBlue’s energy sector doubled during the quarter, marking its sixth consecutive quarter of growth, Owen said. Chief Financial Officer Carl Schweihs said the upside to the company’s guidance came largely from energy project work in regions with higher bill rates. Weather was not a significant factor during the quarter, he said.

Gross margin fell to 20.5% from 22.7% a year earlier, primarily because of the increased share of energy work within PeopleReady. Schweihs said pass-through travel costs reduce the reported gross margin on that work, although its underlying margin is consistent with other large PeopleReady accounts. Total gross profit increased by $9 million.

TrueBlue reduced selling, general and administrative expenses by 3% while growing revenue. Schweihs said the company’s cost structure allowed a significant portion of the revenue upside to flow through to profit.

All three segments grow

PeopleReady revenue rose 34%, led by energy demand. Segment profit more than doubled, and its profit margin expanded by 270 basis points. The segment’s on-demand business grew for a second consecutive quarter, with growth across all operating regions.

PeopleManagement revenue increased 2%, as growth in commercial driving services was partly offset by lower OnSite volumes. The commercial driver business recorded its 11th consecutive quarter of growth. PeopleManagement’s profit margin improved by 100 basis points.

PeopleSolutions revenue rose 1%, and its profit margin expanded by 60 basis points. Schweihs said broader market conditions continued to restrain hiring volumes, but trends improved each month and returned to growth in September.

TrueBlue won more than $50 million in annualized OnSite business during the third quarter. Owen said annualized win volume more than doubled from a year earlier. Schweihs expects OnSite to contribute to growth in the fourth quarter and said wins came across its customer portfolio, including manufacturing, distribution and transportation.

Fourth-quarter outlook

TrueBlue forecast fourth-quarter revenue growth of 20% to 24% year over year, with improved trends across all three segments. Schweihs said the outlook includes the higher bill rates the company has seen, as well as the typical effects of holidays and weather. He also cautioned that the timing of energy projects can fluctuate and that some larger project volumes are expected to normalize toward year-end.

At the high end of the outlook, the forecast implies growth of approximately 37% for PeopleReady, 9% for PeopleManagement and 6% for PeopleSolutions, Schweihs said. He added that October trends were similar to those at the end of the third quarter.

TrueBlue ended the quarter with $20 million in cash, $102 million in debt and $66 million in unused borrowing capacity, for total liquidity of $86 million. Stronger-than-expected revenue growth drove a $35 million increase in working capital. Schweihs said the company expects to return to positive free cash flow as working capital normalizes.

About TrueBlue (NYSE:TBI)

TrueBlue, Inc NYSE: TBI is a workforce solutions company that connects businesses with employees and provides staffing, recruiting and workforce management services. Its offerings support employers seeking temporary, contingent and permanent workers across a range of industries, including manufacturing, logistics, retail, hospitality, construction and other commercial sectors.

The company operates through several specialized brands. PeopleReady provides industrial and general labor staffing, while PeopleManagement offers on-site workforce management and contingent labor solutions.

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