Our next company is TrueBlue, ticker TBI. Joining us today is Taryn Owen, President and CEO, and Carl Schweihs, Chief Financial Officer. Before we begin, we will have time for Q&A following prepared remarks in a fireside chat format. You do not need to wait until the end. If you would like to submit a question, just click on the Q&A prompt at the bottom of your screen. You do not need to wait to do that. You can do that at any time. With that, we will be able to launch right into our time together today. Good afternoon, and thank you for joining us today. For those who are new to the story, can we begin with a brief profile of TrueBlue?
Yes. Thank you, Marc. Excited to be here today. Hi, everyone. Just a quick reminder that our safe harbor statements apply to our discussion today and are provided here for your reference. Before we take questions, as Marc mentioned, we'd like to give a brief introduction to the company. We'll spend time talking about TrueBlue's differentiated market position, how we are uniquely positioned to help customers solve their workforce challenges. We'll walk you through three compelling strategies that we are focused on across our business to drive top-line growth and margin expansion. Finally, we'll review our focused capital strategy, as well as the experience of our leadership teams. TrueBlue's mission is to connect people and work. Since our founding, we have connected more than 10 million people with work and serviced over 3 million clients across a variety of industries.
As one of the largest U.S. staffing providers and global recruitment process outsourcing providers, we generated $1.6 billion in revenue last year. Our teams are consistently recognized as leaders, and our mission-driven employees are dedicated to serving customers with excellence every day. The world of work is quickly evolving, and companies are turning to human capital experts with innovative workforce solutions to help solve their growing talent challenges. They are looking for digital engagement with insights, ways to be more nimble and efficient, and the ability to adapt to varying levels of workforce complexities. This aligns with our strengths and creates compelling long-term opportunities for our business. The combination of our technology and ability to quickly scale up and down with changes in hiring volumes make us an efficient solution for businesses with changing workforce needs.
Fulfilling our mission to connect people and work requires agility and adaptability, and that's what our business model provides. TrueBlue is at the forefront of connecting people in work supported by our high-touch, specialized digitally enabled solutions, making us a leader in the changing world of work and elevating our growth and profitability potential.
I'll turn it over to Carl to share further details on our unique market position.
Thank you, Taryn. To support our clients' various needs, we provide a breadth of specialized service offerings. PeopleReady is our largest segment and a leading provider of on-demand general and skilled labor for North American industrial staffing market. We service our clients with the strength of our national footprint, expansive local market presence that's digitally enabled with our award-winning JobStack mobile application. Our PeopleManagement segment provides contingent on-site industrial staffing and commercial driver services in North America. The essence of a typical PeopleManagement engagement is supplying an outsourced workforce that involves multi-year, multimillion-dollar on-site or driver relationships. People Solutions is our highest margin segment and a global leader in filling permanent positions through our recruitment process outsourcing services, as well as providing talent, advisory, and healthcare staffing solutions.
Our PeopleScout brand supported by our Affinix technology, with buyers often citing it as a key factor in choosing PeopleScout over other market solutions. Having served in the staffing industry for more than three decades, we have well-established brands, deep expertise, and competitive advantages of scale, technology, and industry expertise that other smaller staffing providers simply cannot match. TrueBlue's in a strong position to capitalize on growth opportunities with tremendous strengths and assets. We have a robust team of talented, dedicated, mission-driven people serving our clients with excellence every day. We have significant scale and expansive market presence. We also have deep expertise and long-standing client relationships.
Our proprietary technology allows us to provide a differentiated user experience while providing operational efficiencies. This combination of expansive presence, deep client relationships, and proprietary tech positions us favorably to capitalize on opportunities in high-demand verticals that will drive growth and increase our margin.
Next, Taryn will walk you through our long-term growth strategy.
Thank you, Carl. We have clear strategic priorities that are focused on top-line growth and margin expansion, enabling us to unlock the full power of our assets. We are focused on enhancing our sales function to drive scalable growth and improve profitability, expanding our presence in high growth and under-penetrated end markets to capitalize on secular growth opportunities, and advancing our digital transformation with a focus on enhancing the user experience and creating efficiencies. We are confident that these three priorities will help us capitalize on the growth opportunities ahead, enhance shareholder value, and advance our mission to connect people and work. Enhancing our sales function is a key strategic focus as we advance towards sustainable profitable growth. For our on-demand staffing business, we recently 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.
This structure and increased sales capacity enable more targeted, localized sales strategies and deeper client engagement. We also continue to advance our enterprise-wide strategic partnership program and cross-selling initiatives, unlocking new client acquisition channels, and fueling a growing pipeline of multi-brand opportunities across our portfolio. Strengthening our business model to enable enhanced sales strategies, innovation, and efficiencies allow us to better leverage our inherent strengths to deliver long-term profitable growth. Another key strategic priority is expanding our presence in high growth and under-penetrated end markets to capitalize on secular growth opportunities. Market expansion has been a significant performance contributor as we leverage our strong market position and expertise to capture demand in attractive verticals with strong growth drivers.
We already have a proven track record in the energy space and a healthy pipeline for continued potential growth in that market, as well as adjacent sub-sectors such as energy storage facilities and data centers. We also continue to improve our strong position in skilled trades overall, with our skilled businesses outpacing the broader market in recent years, and our skill development programs providing opportunities for workers to build careers in skilled trades while bolstering our talent pool to fill critical market gaps. We are well-positioned to fill staffing shortages in skilled trades and have experience and relationships to drive growth in other key end markets such as healthcare and professional services. We also continue to advance the digital transformation of our business, positioning us to drive efficiencies and expand our reach.
A key factor in our ability to deliver a differentiated user experience while also driving operational efficiencies is our portfolio of proprietary technology platforms, including JobStack, Affinix, and Stafftrack. We've made significant progress enhancing the capabilities of our digital ecosystem with advancements that include AI-powered job matching, predictive analytics, and behavioral insights across the talent lifecycle. Our technology allows us to deliver smarter workforce solutions, creating greater value for the customers and talent we serve while expanding our reach and supporting efficiency at scale.
Carl will review our operational strength and capital strategy.
Taryn, we've simplified our organizational structure to reduce complexity, eliminate silos, and reduce our overall cost to serve. We've also consolidated several functions into shared services to reduce SGA and redeploy our resources towards high-value, revenue-generating growth initiatives. Our focus is on leveraging our automation and our proprietary technology to continue streamlining workflows, driving efficiencies, and enhancing operating leverage. We have a strong balance sheet and ample liquidity, which provides us with flexibility to weather economic headwinds and make key strategic investments to support future growth opportunities. In terms of capital allocation strategy, share repurchases remain important, but they're balanced with protecting our liquidity position and making strategic investments to advance our business model.
Investing in the business is a top priority, with the focus on high ROI investments in sales and automation, as well as through product differentiation and efficiency-enabling tech investments.
I'll pass it back to Taryn for the last remaining highlights.
Thanks, Carl. I'd like to take a moment to highlight our leadership team, which is the driving force behind everything we've discussed today. The team you see here has a deep history of staffing experience to guide the company through current market conditions and long-term growth opportunities. I'm proud to serve alongside this team as we work to lead TrueBlue forward. To close, I want to reiterate the tremendous strengths and assets we have at TrueBlue as we continue to advance our long-term growth strategy. We are a market leader with strong industry growth prospects and compelling strategies that we are focused on advancing. We are committed to managing a strong liquidity position and have a history of consistently returning capital to our shareholders. We have a talented and dedicated team with deep expertise and a commitment to our mission to connect people and work.
Thank you for your interest in TrueBlue. We are now ready for questions.
Thank you very much. I wanted to start with the following: 1Q results. You did have commentary regarding 2Q and your expectations, which included year-over-year revenue growth in a range of 2%-8%, as well as sequential gross margin expansion of 130-170 basis points. For those who may not be familiar, maybe you can share some of the drivers behind those expectations for the 2Q commentary.
Thanks, Marc. Look, we're seeing strong momentum across our attractive markets. We expect growth across all of our skilled businesses as we continue to capture rising demand in that space. We also expect sequential gross margin expansion as we move through the year. Really, our business mix shifts towards our PeopleReady on-demand business, which begins to ramp in the spring with outside work and gets to higher volumes in Q3 and Q4. It's also important just to keep in mind that we typically see our highest volumes in the second half of the year due to the seasonality of our business. While we expect to see improved operating leverage in the second quarter, which we guided to, our lean cost structure will lead to further margin expansion, and improvement as we move through 2026.
Okay, great. Wonder if you could share some thoughts on particular areas where you see the opportunity for improved market share. I know it's sort of a challenging economy out there, but maybe you could talk a little bit about some of the market share gain opportunities that you have in front of you.
Sure. Thanks for the question. We're focusing on our expansion efforts on those attractive high-growth markets across our business. Thinking about energy, healthcare, government, are particular areas of focus for us. We already have a strong track record of success in energy, and there are an increasing number of secular growth drivers in this space, positioning us to capture further upside as we continue to expand into adjacent sub-sectors, including those supporting data centers and energy storage facilities. Healthcare also remains a significant long-term market opportunity for us, with strong secular growth drivers as we continue to strengthen our market position with new business wins and geographic expansion of our healthcare staffing business.
Finally, we're expanding our presence in the government vertical, most notably with our RPO and talent advisory solutions, securing new business in this growing market with those long-term secular tailwinds. We talked about the large new win that we had with the U.K. Armed Forces in our PeopleScout business that we're excited to serve.
Great. For those who may not be familiar, you had announced a strategic partnership with a leading group purchasing organization, that partnership had led to approximately $11 million in annualized new business when you reported 1Q results, I believe. Maybe you could just give a little bit of background for those who may not be familiar, as well as an update on the benefits of the partnership and the pipeline there?
Yes, thank you for that. We're really just at the tip of the iceberg relative to this partnership and are very encouraged by the progress that we are seeing. It's really driving new business opportunities and expanding our sales reach nationwide. As you mentioned, we secured $11 million of annualized new business wins in the first quarter through this partnership, and we're continuing to build momentum as we expand this relationship into new sectors. Just a couple of recent wins that we've had include two nationwide retail stores, and we'll have work beginning with those customers here coming up in future quarters. Headline news is we've got a strong pipeline here with many opportunities ahead with this group purchasing organization partnership.
Great. Wonder if you talk a little bit about how you see the evolution of your go-to-market strategy and how we might see that in each of the three segments?
Yeah, great question. I think it's important to note that we're meeting our customers and employers and talent where they are. With our really omnichannel workforce delivery, we're able to leverage our expansive market presence and our proprietary technologies to really deliver a full spectrum customized solution to our customers. Whether it's global hiring or national account delivery to local talent matching, to high-touch on-site services, we're able to provide the scale, but importantly, the customization required to fit each of our customers' and prospects' unique needs as it relates to their workforce challenges. I talked earlier about our sales model and the work that we've done there to accelerate growth and capture incremental demand by expanding that sales capacity.
Again, just making sure that we're customizing our solutions for our customers. We have a broad base of brands and solutions that we can bring to the table to solve the number of workforce challenges that are out in the market.
Okay, excellent. Certainly would need to address the giant elephant that's in every room. Maybe you could talk a little bit, maybe spend a couple of minutes on your views on artificial intelligence. AI is both a driver for demand, but also an internal efficiency benefit.
Yes, great question. AI is differentiating TrueBlue's service in ways that improve scalability, productivity, and satisfaction. Ultimately, with an aim to increase the value that we're providing to both our customers and to the associates that we put to work. We do have AI embedded across our proprietary technologies. Again, that's JobStack, Affinix, and Stafftrack, which is really helping us to enhance every stage of the process and staffing life cycle. From an internal perspective, we have AI-driven efficiencies that are really helping us to reduce those administrative bottlenecks, really improve our fulfillment rates for the jobs that we're filling on behalf of our customers, which frees up our team's time, allowing them to focus more on strategic workforce management rather than those routine tasks, which ultimately not only helps us expand our reach, but lower our cost of delivery as revenue per headcount increases.
I would just say overall, we see both top-line growth and margin expansion opportunity as a result of AI.
Okay, excellent. Then one of the things that you touched on this a little bit, maybe we can delve a bit deeper into it. You have a diverse customer base when it comes to the industry verticals. You made mention in your prepared remarks around the energy business and some of the strength that you've seen there. Maybe you could share some of the things that you're seeing with some of the other key industry verticals, as well as any which that stand out that maybe investors may not be as familiar with.
Yeah. Thanks, Marc. I'll take that one. I know there was a question maybe that popped up into the Q&A, I'll try to address that one as well, and maybe hit energy first. Yeah, our revenue and energy sector, it's more than doubled for the third consecutive quarter. Really, we have strong client relationships, deep expertise in this space, over a decade of experience, and we continue to capture demand. From a what's next, we have a really solid pipeline within our renewable business. We work with some of the larger EPCs in the space. We continue to add logos, with several projects expected to ramp up here in Q2. I'd also say that there's just a couple of increasing secular growth drivers in that energy space as well, which position us well to capture further upside as we expand into call it adjacent sub-sectors.
Think of energy, battery storage and other areas that we're seeing more success in. Also on the energy side, within data centers. There's some bring your own power requirements to some of the data center projects now. About a third of our energy projects are now attached to those data centers. Feel like we've got some good move there. Then outside of energy growth, as we've kind of already discussed, our commercial driver business continues to outperform the broader market. It's in its ninth consecutive quarter of growth for us at TrueBlue. Really, again, due to strong client relationships, deep expertise in the space. What we've really seen is a lot of taking share in our managed offering within that business.
We feel like with the transportation market starting to pick up a little bit, we have some room for more growth in that business as well. Then I'd say what we're looking at is really where there's structural labor shortages. Those are leading to rising demand and skilled roles, which we have across our portfolio. Those end markets with energy, commercial truck drivers, just being two of those examples. Then the last piece I'd just add is during the first quarter, we also saw improved trends in professional services and hospitality verticals. Beyond the secular growth opportunities we're targeting in those areas, such as healthcare, we're also focused on capturing that demand with events and venues as large sporting events create additional opportunity for us.
Great, actually, that's a great segue into next question around the vertical. The HSP acquisition, for those who may not be familiar with Healthcare Staffing Professionals, that acquisition closed a little over a year ago in February of 2025. With the time that you've now had them under your umbrella, maybe you could share some thoughts on both the acquisition, the purchase, the integration there, as well as the healthcare vertical in general.
Yeah, thanks for the question. Healthcare remains a significant long-term opportunity for us with those strong secular growth drivers. We've made significant progress expanding into the healthcare end market, with wins spanning across our range portfolio, as well as the addition of HSP. HSP adds deep healthcare expertise, which does strengthen our ability to serve specialized segments and pursue those new higher growth opportunities in an end market with significant untapped potential. Since joining TrueBlue, HSP has expanded its geographic presence by over 50%. We are committed to really thoughtfully scaling this business to capture sustained demand. Really, really pleased with the progress so far.
Okay. In your prepared remarks, you made commentary around the plans on strengthening the sales team in select markets and geographies. Maybe you could discuss some of the key drivers, some of the things that you're looking for in those market selections and the potential timeframe we might have in those plans.
Yeah, I'll start and ask Carl to weigh in as well. As you mentioned, we aligned our PeopleReady on-demand organization into sales territories that include one or more branches under single leadership to grow our customer base. Our strategy is to enhance our sales abilities in those territories, we've made a lot of good progress as it relates to increasing that sales capacity. The sales reps are strategically placed to attack the largest market opportunities across the country, implementing targeted, localized sales and deeper client engagement. We're continuing to see strong performance across our territories and sales organization with metrics that highlight improved growth and profitability.
In our on-demand business, we saw stronger performance in our local business in Q1, which is driven by the continued sales investments that we've made. We have a lot of room to add to that, we're taking a measured approach. It's an ongoing process of continued optimization.
To add on to this, we talked about this Q1 as well. [crosstalk] Oh, sorry.
No, go ahead.
I was just going to say, we've also kind of the East region return to growth in Q1 and continue to see more and more territories returning to growth as that strategy continues to take hold. Encouraging signs there as well.
Okay, great. I was wondering if you'd talk a little bit about what you've seen with the RPO pipeline and the sales cycle more recently there.
Yes. Clients are continuing to navigate evolving market conditions. With that, we're very encouraged to see signs of stabilization with growing momentum in new RPO business wins and expansions. We're adding new clients to our portfolio and expanding existing client relationships. As our customers' hiring volumes return to more normalized levels within each of their unique businesses, the scale of these engagements position us very well to accelerate growth. As you may recall, Marc, we had our PeopleScout team recently won a nine-year RPO deal with a law enforcement agency in the U.K. This win, along with our previous win in the U.K. with the Armed Forces, has opened more opportunities for us in the government sector, where PeopleScout is actively building on additional projects. We're really pleased with that development.
Okay, great. You made mention of this a bit on the prepared remarks, but for those who may not be familiar with JobStack, maybe you could share just some of the benefits of the platform and how it differentiates you from your competitors.
Sure. Our JobStack system is proprietary. It positions us to drive really efficiencies in the business, efficiencies with our customers and for our associates, and expand our reach. We have this system, we can control our roadmap and very quickly address evolving user needs with feedback coming from our customers, our associates, and our local teams. JobStack overall delivers an enhanced customer experience. It helps to improve our sales effectiveness. Again increases those operational efficiencies, freeing up our team to focus on higher value work. As it relates to the associate and client experience, we're really able to utilize this tool to drive higher engagement. There's a couple of features that I'll call out. We do have functionality that really streamlines the matching process, which ultimately reduces our time to placement and enhances flexibility for our customers and our associates.
We also have an AI-enabled bill rate function that provides fast data-informed guidance to our staff, which support them in making more appropriate bill rate quotes, and helps our customers with their own staffing decisions. I would just say, overall, our platform modernizes the staffing experience with that AI matching tool and pricing to deliver a faster, more transparent workforce solution, that again, is complemented by our national footprint and our local teams that are out serving those customers.
Okay. Excellent. I wanted to shift over to the balance sheet, which is strong, which is a good thing to have. Maybe you could talk a little bit about current thoughts on capital allocation prioritization at this point.
Yeah, thanks, Marc. Look, we're focused on balancing ample liquidity, continuing to make strategic investments where it provides growth opportunity for us. As we have historically returning excess capital to shareholders via share repurchases. Currently with excess cash and as free cash flow improves, we're looking to pay down debt first. We continue to manage our fixed cost base down. Our capital spend is now under 1% of revenue. With the business returning to organic growth, we expect to pay down our debt throughout the year. I'd say share repurchases, they remain important, but balance first with maintaining a strong balance sheet. We've got about $34 million remaining under that share repurchase authorization.
Okay. Excellent. We're toward the end, as time flies, always. We're toward the end of our time together today. Maybe you could just share some closing remarks about TrueBlue for our investors today.
Yeah. Thank you. We are encouraged by the momentum that we are seeing in our business and our strategic priorities taking hold. We've reported three consecutive quarters of growth and guided to a fourth here in Q2. We're anxious and excited to capture that momentum.
Excellent. Well, I want to thank you for joining us today and presenting as well as all of our participants for joining us today with TrueBlue. Everybody have a wonderful and productive remainder of the day. Thank you so much.
Thank you.
Thanks, Marc.