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TrueBlue's (TBI) CEO Steve Cooper on Q1 2016 Results - Earnings Call Transcript

TrueBlue, Inc. (NYSE:TBI)

Q1 2016 Results Earnings Conference Call

April 20, 2016, 05:00 PM ET


Derrek Gafford - EVP and CFO

Steve Cooper - CEO


Kevin McVeigh - Macquarie Research

Jeff Silber - BMO Capital Markets

Sara Gubins - Bank of America Merrill Lynch

Mark Marcon - Robert W. Baird

Randy Reece - Avondale Partners


Good afternoon. My name is Connor and I will be your conference operator today. At this time, I’d like to welcome everyone to the First Quarter 2016 TrueBlue Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]

Thank you. Derrek Gafford, TrueBlue CFO, you may begin your conference.

Derrek Gafford

Good afternoon, everyone. Here with me is CEO Steve Cooper. Before we begin, I want to remind everyone that any forward-looking statements made by management during today's call are subject to the Safe Harbor statements found in TrueBlue's press release and SEC filings.

Any forward-looking statements in today's call speak only as of the date of which they are made and we assume no obligation to update or revise any forward-looking statements.

The company's first quarter earnings release and related financial information are available on TrueBlue's corporate website at under the Investor Relations section. This call is being recorded and a replay will be available on the Company's website.

The discussion today contains non-GAAP terms including but not limited to EBITDA, adjusted EBITDA and adjusted earnings-per-share. Adjusted EBITDA excludes non-recurring integration and acquisition cost and processing fees related to the capture of the worker opportunity tax credit.

Adjusted earnings per share excludes non-recurring acquisition and integration costs, amortization of intangible assets WOTC processing fees and adjusted income tax expense to the ongoing expected rate of 32%. These are measurements used by management in assessing performance and in our opinion provide investors with additional insight on the underlying trends of the business. Please refer to the non-GAAP reconciliation on our Investor Relation’s website for a full reconciliation of both current and historical periods.

I’ll now turn the call over to Steve.

Steve Cooper

Thank you, Derrek. Good afternoon, everyone. Today, we reported our 2016 first quarter results. First quarter revenue grew 13% to $646 million which included 4% organic growth and 9% from acquired businesses. Adjusted EBITDA and adjusted income per diluted share both grew 9% for the 13-week period.

Our results for the first quarter were disappointing compared to our expectations. I want to share five areas impacting our results and the outlook provided today. One, organic revenue has recently slowed; two, gross margin compression related to wage inflation; three, SG&A increases outpaced revenue growth; four, change in scope of services for our largest customer; and, five, the recent acquisitions are performing better than expected.

First, organic revenue slowed in our Staffing Services during the quarter and in particular March resulting in less overall revenue than expected by $20 million. We missed our expectation regarding organic revenue growth. We had expected 7% organic growth during the first quarter and only produced 4%.

Our organic growth was over 8% in January. It reduced to 5% in February and for the month of March it was negative by almost 1%. There was surely a shift in demand as the quarter came to a close. The quarter slowing through the quarter was across many geographies and industries that we serve. The slowing was especially pronounced for our large national customer base and the retail industry in particular.