Greetings, and welcome to the TrueBlue Fourth Quarter 2025 Earnings Call. [Operator Instructions] 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 risks 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 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, a copy of the company's prepared remarks will be provided on TrueBlue's investor website at the conclusion of today's call, and a full transcript and audio replay will be available soon after the call. It is now my pleasure to turn the call over to Taryn Owen, President and Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome, everyone, to today's call. I am joined by our Chief Financial Officer, Carl Schweihs. Before we discuss our fourth quarter results, I'd like to take a step back and reflect on the year. During 2025, we executed on our strategic priorities with discipline and focus, forming a strong foundation to build upon as we advance towards sustainable, profitable growth. We restructured our business model to expand our sales capability, unlock additional growth opportunities and improve profitability while tightly managing costs. For our on-demand staffing business, we executed a comprehensive reorganization of our operating model, transitioning to a more efficient, territory-based structure and investing in sales resources to expand our reach in key markets. This structure and increased sales capacity enable more targeted, localized sales strategies and deeper client engagement. As a result, our sales-enabled territories continue to deliver stronger sequential performance. We've also focused on strategic partnerships and cross-selling initiatives as we continue to prioritize our return to growth. We launched an enterprise-wide strategic partnership with a leading group purchasing organization, unlocking new client acquisition channels and fueling a growing pipeline of multi-brand opportunities across our portfolio. This partnership has led to approximately $15 million of annualized new business wins and continues to build momentum as we expand the relationship into new sectors. We are also fostering stronger partnerships across our brand portfolio. Greater enterprise alignment and collaboration continue to create more cross-selling opportunities, allowing us to better serve client needs and accelerate growth with our full spectrum of specialized workforce solutions. For example, collaboration between our PeopleReady and PeopleManagement teams continues to deliver results, with our commercial driver business securing 3 additional new locations serving a leading energy solutions manufacturer. Market expansion was a significant performance contributor over the past year as we leveraged…

Thank you, Taryn. Total revenue for the quarter was $418 million, up 8% and near the high end of our outlook range. Organic revenue increased 5%, with the acquired HSP business contributing 3 percentage points of growth. Robust results in skilled trades fueled organic growth as overall market conditions showed ongoing signs of stabilization. Our skilled businesses continued to outperform the broader market, delivering double-digit growth for the third consecutive quarter, driven by our team's success in capturing rising demand in the energy vertical. Our other business lines are also showing improved trends and solid momentum going into 2026 as we maintain our strategic focus on accelerating growth. Gross margin was 21.5% for the quarter, down from 26.6% in the prior year period, primarily due to less favorability in the prior year workers' compensation reserve adjustments and the changes in revenue mix. As you may recall, 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. For the revenue mix impact, this stems from more favorable trends in our staffing businesses and outsized growth in PeopleReady renewable energy work. As a reminder, renewable energy work carries a lower gross margin than the general PeopleReady business due to pass-through travel costs involved. Outside of these costs, the underlying margin for renewable energy work is consistent with other large PeopleReady accounts. We successfully reduced SG&A by 11%, even while revenue grew 8% for the quarter. This improved leverage demonstrates our continued commitment to managing costs and delivering enhanced profitability. We've made significant progress, creating greater flexibility to scale and driving efficiencies that position us well to deliver strong incremental margins as industry demand rebounds and we further advance our growth…

Thank you, Carl. Before turning to Q&A, I want to touch briefly on the recent announced changes to our Board of Directors. Over the course of several months, TrueBlue engaged with shareholders as part of a deliberate Board refreshment process. In early 2026, we welcomed 2 highly-qualified independent directors with deep operational and commercial experience and announced that 2 current directors would step down at or before our 2026 Annual Meeting. This refreshment strengthens and broadens the Board's capabilities while reinforcing our commitment to shareholder engagement and effective oversight. As you have heard from us today, we have a clear strategy to drive long-term sustainable value and it is producing results. We have executed on this strategy with discipline and focus, strengthening our market position, diligently managing our cost structure and building momentum to fuel future growth. In 2026, we are acutely focused on capturing market share as we further strengthen our sales reach and expand in growing markets, leveraging our efficient and scalable operating structure to deliver improved profitability. We are confident we have the right people, structure and strategy to drive TrueBlue forward, accelerating our growth, enhancing shareholder value and advancing our mission to connect people and work. This concludes our prepared remarks. Operator, please open the call now for questions.

[Operator Instructions] Our first question is from Marc Riddick with Sidoti & Company.

So I wanted to maybe start where you left off there with the margin discussion. Maybe you could talk a little bit about how, given sort of the different rates that we're seeing of business recovery and client demand improvements, how that might impact the overall firm-wide margin trajectory as we sort of move forward through the year. And this is -- we're putting aside the prior year workers' comp part of the conversation, but maybe you could sort of talk about the margin trajectory going forward.

Yes, Marc, I'll take that. We've done a really good job managing costs and controlling what we can in this market. And we've mentioned this in the past, we feel like with the optimized cost base that we have, we're poised for significant incremental margins and expanding our profitability as demand rebounds. Just historically, our incremental margin has been between 15% and 20% kind of across the portfolio. But with the actions that we've made, we believe we'll do a little bit north of that range, and depending on obviously the segment which it comes in. So kind of all told, if we're in that normalized industry growth rates, we'd expect to expand our EBITDA margin percentage upon those sort of growth rates. Right now though, our entire focus is really around controlling what we can control. Whether or not we see a faster recovery or a slower recovery, we're going to continue to be driving growth and productivity and focused on driving increased profitability in the business.

Okay. Great. And then maybe you could sort of shift over to the energy activity and renewals in particular, with the top line growth that you're seeing there. Can you talk a little bit about the visibility and sustainability of that growth in activity? And then maybe you could talk a little bit about what you're seeing as far as new business wins and the current pipeline and maybe sort of the strategic approach that you're taking there to sort of maintain growth going forward there.

Marc, we're very encouraged by the momentum in our energy business, especially in renewables. Expanding in high-growth, underpenetrated markets is a key strategic priority for us across the brand portfolio, and energy is a great example of this. We're seeing strength across commercial solar and full-scale renewable projects. And we're also focused on expanding into nonrenewable energy sectors as well. As mentioned in our prepared remarks, our energy business more than doubled for the second quarter in a row, really driven by our expertise and the strong client relationships that we've built with these clients over the past decade. In quarter 4 alone, we secured several multimillion dollar project wins, and our pipeline remains very healthy, positioning us very well for continued growth in this space.

Yes, if I could just add a couple of points here, and Taryn mentioned kind of that decade of experience here, so we feel good about kind of what we've done. But it does expand just beyond the renewables. And energy as an end market for us reached 15% of our portfolio at the end of '25 here. It was 10% as of 2024. So we don't think the energy usage here in the U.S. is going down anytime soon, so we feel good about that opportunity as we move forward.

Okay. Great. And then you made a commentary during your prepared remarks around the contributions with HSP and what you're seeing health care wise. Can you maybe talk a little bit about how you view that vertical? And sort of as an offshoot, as far as prepared potential cash usage, is there room for inorganic pursuits in that space or any that you see as attractive at this point?

Marc, let me take that first one. So yes, in Q4, HSP delivered about $40 million of inorganic growth, reflecting really our growing traction in that market and strong progress of our integration work. We remain confident in the strategic value of the acquisition and intend to continue our expansion in the high-growth end markets. This acquisition was accretive to us. It allows us to continue to capitalize on secular growth opportunities in the health care space, and think that that's going to be a long-term driver for our business. As we just kind of look back on the original kind of strategy with our HSP acquisition, as a regional West Coast-based firm, that we had plans to expand into more states and more geographies. And as Taryn mentioned on the prepared remarks, we added another state, so we're in our third new state since launch, and feel good about this one continuing to be a good driver for us going forward.

And Marc, to answer your question regarding M&A, right now, we're not prioritizing M&A, but instead focusing on managing the business to cash flow positive. We'll continuously, of course, evaluate any opportunities to maximize shareholder value and position TrueBlue for long-term success.

Our next question is from Mark Marcon with Baird.

Just want to start with the energy business. So Carl, you said it's 15% of the total portfolio at this point. Is that correct?

That's energy as an end market. So that's kind of across all of our portfolios. It's 15% across PeopleSolutions, PeopleManagement, PeopleReady as well.

Got it. And what about just the renewable energy within PeopleReady?

Yes, that's about 1/3 of our business probably.

And just trying to dig down into the gross margins, if we take a look at that business, because you've got some pass-through, how much of that business is pass-through?

Yes. No, great question. It does have pass-through costs, and that's what we kind of called out in the remarks as well, Mark. So as you kind of think about that significant growth, it resulted in about 200 bps of gross margin contraction, as we've got those pass-through costs that go into that business. So our on-demand business obviously has a bit higher gross margin. But it's important to note that this is still a high EBITDA margin business for us.

And what percentage of the revenue from that is pass-through?

What percentage of the revenue of that is pass-through? Is that the question?

Yes.

I don't have the numbers in front of me, Mark. But it's about 1/3. And I'd say the gross margins, probably 60% of the rate is of our on-demand business.

Okay. That's helpful. Great. And then can you talk, just in PeopleReady, we're starting to hear and see some signs of economic recovery. If we strip out that renewable energy business, and maybe even stripping out the commercial driver business, on the PeopleReady side, what are you seeing in terms of organic growth outside of those 2 spaces? Are you seeing any signs of improvement?

Yes, Mark. So yes, PeopleReady did see kind of improved trends with our kind of weekly sequential revenue growth during the quarter. Now it was driven by that skilled businesses that we had talked about. Just to kind of put this in perspective, we exited Q4 at a similar rate to Q3. So plus 16% in Q4, plus 18% in Q3. I'll kind of give a couple of other just trends across the portfolio as well. In our PeopleManagement business, those kind of monthly trends were largely in line with our quarterly results. And then as we kind of moved into January, I know this is -- tends to be one of the ones you guys are thinking about, strong results in January as well, then they were offset by a little bit of weather impact that we saw across the country. The last thing that I'd just call out here too, Mark, is in our PeopleReady on-demand business, which is one of your questions, we did see stronger performance in our local business versus our national accounts. So really driven by a lot of the sales investments that we've made in there. And then from an end market perspective, I'd say the biggest improvements we saw across our portfolio: energy, hospitality and manufacturing.

And then just going back to the gross margin, what was the difference in terms of what changed the level of favorability in terms of the accrual reversals a year ago relative to this year?

No change in our expectations, so we guided to that as well. It had about 290 basis points impact to Q4 results, Mark. But we have called those out in Q4 of '24 as well. They were really our prior year reserve credits that impacted it. So that's the impact.

I'm just trying to get to what caused the change. In other words, are you starting to see a higher level of workers' comp claims? Are the cost of the claims potentially changing at all? What's going on underneath the surface?

Yes. Great question. So no, from a worker safety perspective, this is really important to our business. We continue to manage our safety and claims processes very, very closely. A lot of what we saw was some of the mix shift in business that we have through kind of our energy business that we talked about, lower revenue models in our on-demand versus our renewables. But nothing changed to the underlying fundamentals. Once we work through Q1, which we guided to as well, this normalizes.

Okay. So it'll normalize starting in Q2?

That's right.

Okay. Great. And then you mentioned the noncash impairment charge of $18 million with regards to the Chicago support center. How much is that going to save you in cash going forward?

About $30 million over the next 10 years.

Is that $3 million per year?

It's -- well, rent escalations a little bit. So I'd say between $3 million and $5 million through those terms. The other thing to just call out on here is ongoing SG&A savings, about $1.5 million in '26, we'll have about $3 million in '27. And then kind of following those cash things that we talked about, it's $3 million to $5 million thereafter.

Okay. And then are you including a WOTC credit in your projections for 2026 or not?

We do. We have a small WOTC credit included in there.

Why? That hasn't passed legislation yet, has it?

Not in our guidance. We don't have anything in our guidance, Mark. We had that in Q4.

Our next question is from [ Jessica Luce ] with Northcoast Research.

I wanted to comment, I know that you mentioned that there are some stronger signs within the local business over national. And I'm curious how you would characterize your conversations with customers today versus if you look back about 6 months ago.

Yes. Great question. I would say overall, our customer sentiment remains cautious due to ongoing uncertainties in the environment. With that said, we're really encouraged to see the positive momentum in the business and signs of that stabilization, particularly in our on-demand business with our second quarter of organic revenue growth here in Q4. We are seeing momentum and a return to growth among some clients and geographies with our teams securing new wins, customer expansions, really all good signs that customers are beginning to experience positive momentum, tempered with some of that uncertainty we talked about.

Perfect. And then just one brief follow-up, how would you describe the current pricing environment? Is there anything that stands out right now?

Yes. From a pricing standpoint, we continue to see kind of some pricing pressure in the business. We had -- our pay rates were up about 3.8% in the quarter, while bill rates were up 2.5%. It led to about a 40 bps decline in our margin during the quarter. Really pay rates were kind of largely in line with where they were in Q3, Jessica, and really increasingly driven by kind of role-specific skills rather than general labor shortages. So while there's still some pricing pressure in the business that we'd expect in this environment, we continue to be disciplined with pricing, watchful to ensure that we're not pricing ourselves out of the market. But feeling good about being able to pass through our bill rate increases.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Thank you, operator, and thank you, everyone, for joining us today. I want to take this opportunity to thank the entire TrueBlue team for their tremendous effort providing our customers and associates with exceptional service and their commitment to 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.

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