Trueblue, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and welcome everyone to today's call.

I'm joined by our Chief Financial Officer, Carl Schweihs. We delivered a strong second quarter, exceeding expectations and continuing to build momentum through disciplined execution. We achieved double-digit top-line growth for the quarter, with continued expansion in skilled verticals and a return to growth in our general on-demand business as our strategy takes hold in a meaningful way. Behind this performance is a clear set of strategic priorities we have been steadily advancing across the business. Our focus is straightforward: strengthening our sales model, expanding in attractive markets, and driving efficiency through technology and disciplined operations to deliver sustainable, profitable growth. Strengthening our sales function continues to be a top priority. We are seeing positive momentum with the improved trends across our portfolio, including a return to growth in our on-demand business.

We have transitioned our on-demand operating model to a more effective territory-based structure and invested in sales resources throughout the business to expand our reach in priority markets. We continue to strategically increase sales capacity to enable more targeted, localized sales strategies and deeper client engagement. Together, these actions are strengthening execution and positioning us to drive further scalable growth. Enterprise-wide partnerships and cross-selling initiatives are creating a practical growth advantage. Our strategic partnership program continues to open new client channels with a strong multi-brand pipeline, while greater collaboration across our enterprise is driving more cross-selling opportunities to deepen relationships and expand with existing clients. These efforts are allowing us to better leverage the full breadth and strength of our workforce solutions to support continued growth. Our strategic focus on attractive end market expansion continues to deliver strong results.

We are capturing demand in skilled verticals, supported by our strong market position and deep expertise. Our revenue in the energy sector nearly doubled, marking a fifth consecutive quarter of growth, while our commercial driver business grew for the tenth consecutive quarter. This sustained growth speaks to our success capturing share in target markets with powerful growth drivers that play to our strengths. We see additional opportunity ahead as structural labor shortages and growing secular forces signal further growth potential, especially as we expand into adjacent subsectors like data centers and energy storage facilities. As we pursue more resilient, higher-value demand, the government and healthcare verticals represent attractive long-term growth opportunities to further diversify our business. We are making meaningful progress in the government sector as we continue to build momentum and expand our market share.

In the U.S. healthcare market, we are thoughtfully scaling as we leverage our deep expertise, recruitment agility, and sophisticated technology to capture sustained demand. While advancing our strategic priorities for top-line growth, we are equally focused on delivering improved profitability. We are operating with discipline, managing costs, driving efficiencies, and leveraging technology to scale. These efforts are producing results as we reduced total operating costs even as revenue grew double digits for the quarter, and all three segments delivered increased profitability with expanded margins. This improved operating leverage, combined with continued cost discipline, positions us well for sustainable margin expansion as we advance our growth strategies. Our portfolio of proprietary technology platforms is a key enabler of our ability to drive efficiency and extend our reach.

We continue to enhance our digital ecosystem with AI-powered features across the talent life cycle, allowing us to connect people and work with speed, precision, and transparency. Continued innovation and advancement of our digital transformations remains a priority, positioning us to deliver greater value to the customers and talent we serve with a differentiated experience while supporting operational efficiency as we accelerate growth. The progress we are seeing today reflects our disciplined execution of our strategy, and while we are encouraged by the results, there is still more work ahead. We remain committed to realizing long-term sustainable value for our shareholders, and we are confident our strategic plan to enhance our sales model, expand our share in attractive end markets, and unlock efficiencies with technology and operational excellence positions us well to capitalize on the growth opportunities ahead.

I will now pass the call over to Carl, who will share further details around our financial results and outlook.

Thank you, Taryn. Total revenue for the quarter was $443 million, up 12% and exceeding our outlook range due to outperformance of our skilled businesses. Our teams continue to capture share in high-demand skilled verticals, delivering a fifth consecutive quarter of double-digit growth. As demand for skilled trades remains strong, we are encouraged to see broader demand trends continue to stabilize and our strategic focus taking hold with our on-demand business returning to growth this quarter and driving solid momentum as we enter the back half of the year. Gross margin was 20.7% for the quarter, down from 23.6% in the prior year period, primarily due to the known workers' compensation and government subsidy benefits in the prior year, as well as anticipated changes in revenue mix.

You may recall that last year's gross margin benefited from a significant reduction in workers' compensation costs due to favorable development of prior year reserves. As expected, that degree of favorability did not repeat this year. The prior year margin also included a non-recurring government subsidies benefit of $3 million. The revenue mix impact stems from outsized growth in PeopleReady energy work. As a reminder, the underlying margin for energy work is consistent with other large PeopleReady accounts, but the pass-through travel costs involved result in lower reported gross margin. We successfully reduced SG&A by 7% while revenue grew 12% for the quarter, demonstrating improved operating leverage and our continued focus on delivering enhanced profitability. We've made significant progress and continue to effectively manage costs, drive efficiencies, and create greater flexibility to scale.

This operational discipline positions us well to deliver strong incremental margins as industry demand improves and we continue to advance our growth initiatives. We reported a net loss of $3 million this quarter, which included a $3 million non-cash write-down of our Tacoma headquarters as a result of the challenging commercial real estate market. Our results also included a small amount of income tax expense, primarily associated with our foreign operations, and essentially zero income tax benefit on U.S. operations due to the valuation allowance in effect on our U.S. deferred tax assets. As a reminder, the asset write-down and valuation allowance have no impact on our operations or liquidity. Adjusted net income was $2 million, compared to a loss of $2 million in the prior year, and adjusted EBITDA was $11 million for the quarter, up from $3 million in the prior year. Let's turn to our segments.

PeopleReady revenue grew 23%, largely driven by outperformance in the energy vertical. Revenue in the energy sector nearly doubled this quarter as we continued to capture share in this growing market. While demand in skilled verticals has continued to rise, we were also encouraged to see our on-demand business return to growth this quarter. These improved trends in our on-demand business speak to the momentum building behind our growth strategy as we continue to invest in sales resources and expand our market reach. Despite the prior year benefiting from significant favorability in workers' compensation adjustments, PeopleReady segment profit margin was up 260 basis points year-over-year, driven by targeted cost actions and improved operating leverage as revenue increased. PeopleManagement revenue was flat to the prior year as growth in commercial driving services was offset by lower on-site volumes.

Our commercial driver business continued to outperform the broader market, leveraging strong client relationships and deep expertise to deliver its 10th consecutive quarter of growth. While on-site client volumes declined for the quarter, trends improved each month with a return to growth in June as new business wins and customer expansions built momentum, positioning the business well entering the back half of the year. PeopleManagement segment profit margin was up 60 basis points due to disciplined cost management actions to drive improved efficiencies and greater scalability. PeopleSolutions revenue declined 5% as broader market conditions continued to curb hiring trends. While hiring volumes remain subdued, we are adding new clients and expanding existing relationships, particularly in higher skilled roles and growing end markets with long-term secular tailwinds.