TrueBlue Reports Fourth Quarter and Full-Year 2020 Results

TRUEBLUE, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

13 weeks ended

52 weeks ended

(in thousands, except per share data)

Dec 27, 2020

Dec 29, 2019

Dec 27, 2020

Dec 29, 2019

Revenue from services

$

518,634

$

591,040

$

1,846,360

$

2,368,779

Cost of services

397,837

442,205

1,405,715

1,748,831

Gross profit

120,797

148,835

440,645

619,948

Selling, general and administrative expense

103,626

132,475

408,307

516,220

Depreciation and amortization

8,029

9,021

32,031

37,549

Goodwill and intangible asset impairment charge

—

—

175,189

—

Income (loss) from operations

9,142

7,339

(174,882

)

66,179

Interest expense and other income, net

1,943

2,014

1,620

3,865

Income (loss) before tax expense (benefit)

11,085

9,353

(173,262

)

70,044

Income tax expense (benefit)

3,059

638

(31,421

)

6,971

Net income (loss)

$

8,026

$

8,715

$

(141,841

)

$

63,073

Net income (loss) per common share:

Basic

$

0.23

$

0.23

$

(4.01

)

$

1.63

Diluted

$

0.23

$

0.23

$

(4.01

)

$

1.61

Weighted average shares outstanding:

Basic

34,529

37,843

35,365

38,778

Diluted

34,954

38,348

35,365

39,179

TRUEBLUE, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

Dec 27, 2020

Dec 29, 2019

ASSETS

Cash and cash equivalents

$

62,507

$

37,608

Accounts receivable, net

278,343

342,303

Other current assets

38,035

41,822

Total current assets

378,885

421,733

Property and equipment, net

71,734

66,150

Restricted cash and investments

240,534

230,932

Goodwill and intangible assets, net

123,802

311,171

Other assets, net

165,622

106,169

Total assets

$

980,577

$

1,136,155

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

$

268,967

$

230,806

Long-term debt

—

37,100

Other long-term liabilities

274,420

242,276

Total liabilities

543,387

510,182

Shareholders’ equity

437,190

625,973

Total liabilities and shareholders’ equity

$

980,577

$

1,136,155

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

52 weeks ended

(in thousands)

Dec 27, 2020

Dec 29, 2019

Cash flows from operating activities:

Net income (loss)

$

(141,841

)

$

63,073

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

32,031

37,549

Goodwill and intangible asset impairment charge

175,189

—

Provision for doubtful accounts

6,300

7,661

Stock-based compensation

9,113

9,769

Deferred income taxes

(26,791

)

1,263

Non-cash lease expense

15,195

14,823

Other operating activities

(686

)

(1,589

)

Changes in operating assets and liabilities, net of amounts divested:

Accounts receivable

57,146

5,450

Income tax receivable

(1,122

)

(6,480

)

Other assets

(2,124

)

(12,575

)

Accounts payable and other accrued expenses

(6,561

)

6,921

Accrued wages and benefits

55,053

(9,494

)

Workers’ compensation claims reserve

(125

)

(10,828

)

Operating lease liabilities

(14,562

)

(15,178

)

Other liabilities

(3,684

)

3,166

Net cash provided by operating activities

152,531

93,531

Cash flows from investing activities:

Capital expenditures

(27,066

)

(28,119

)

Divestiture of business

—

215

Payments for company-owned life insurance

(12,031

)

(12,210

)

Purchases of restricted available-for-sale investments

(2,896

)

(7,667

)

Sales of restricted available-for-sale investments

12,311

20,859

Purchases of restricted held-to-maturity investments

(32,495

)

(22,963

)

Maturities of restricted held-to-maturity investments

27,561

28,254

Other

205

—

Net cash used in investing activities

(34,411

)

(21,631

)

Cash flows from financing activities:

Purchases and retirement of common stock

(52,346

)

(38,826

)

Net proceeds from employee stock purchase plans

922

1,329

Common stock repurchases for taxes upon vesting of restricted stock

(2,438

)

(2,222

)

Net change in revolving credit facility

(37,100

)

(42,900

)

Other

(1,540

)

(296

)

Net cash used in financing activities

(92,502

)

(82,915

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

623

936

Net change in cash, cash equivalents, and restricted cash

26,241

(10,079

)

Cash, cash equivalents and restricted cash, beginning of period

92,371

102,450

Cash, cash equivalents and restricted cash, end of period

$

118,612

$

92,371

TRUEBLUE, INC.

SEGMENT DATA

(Unaudited)

13 weeks ended

52 weeks ended

(in thousands)

Dec 27, 2020

Dec 29, 2019

Dec 27, 2020

Dec 29, 2019

Revenue from services:

PeopleReady

$

297,471

$

364,801

$

1,099,462

$

1,474,062

PeopleManagement

179,306

171,344

586,822

642,233

PeopleScout

41,857

54,895

160,076

252,484

Total company

$

518,634

$

591,040

$

1,846,360

$

2,368,779

Segment profit (1):

PeopleReady

$

16,198

$

17,963

$

43,200

$

82,106

PeopleManagement

5,654

2,778

11,717

12,593

PeopleScout

4,450

5,407

4,525

37,831

Total segment profit

26,302

26,148

59,442

132,530

Corporate unallocated expense

(4,608

)

(5,190

)

(20,714

)

(21,870

)

Total company Adjusted EBITDA (2)

21,694

20,958

38,728

110,660

Work Opportunity Tax Credit processing fees (3)

(186

)

(240

)

(495

)

(960

)

Acquisition/integration costs

—

50

—

(1,562

)

Goodwill and intangible asset impairment charge

—

—

(175,189

)

—

Gain on deferred compensation assets (4)

(1,725

)

(495

)

(1,725

)

(495

)

Workforce reduction costs (5)

19

(2,829

)

(12,570

)

(3,301

)

COVID-19 government subsidies (6)

(964

)

—

6,211

—

Other adjustments, net (7)

(1,667

)

(1,084

)

2,189

(614

)

EBITDA (2)

17,171

16,360

(142,851

)

103,728

Depreciation and amortization

(8,029

)

(9,021

)

(32,031

)

(37,549

)

Interest expense and other income, net

1,943

2,014

1,620

3,865

Income (loss) before tax expense (benefit)

11,085

9,353

(173,262

)

70,044

Income tax expense (benefit)

(3,059

)

(638

)

31,421

(6,971

)

Net income (loss)

$

8,026

$

8,715

$

(141,841

)

$

63,073

We evaluate performance based on segment revenue and segment profit. Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income, income taxes, and other adjustments not considered to be ongoing.

See the Non-GAAP Financial Measures table on the next page for definitions of EBITDA and Adjusted EBITDA.

These third-party processing fees are associated with generating the Work Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

Gain realized on sale of deferred compensation mutual funds to purchase corporate owned life insurance policies.

Workforce reduction costs for the 13 and 52 weeks ended December 27, 2020 were primarily due to employee reductions as part of our cost management actions in response to COVID-19. For the 13 and 52 weeks ended December 29, 2019, the workforce reductions costs were primarily associated with employee reductions in the PeopleReady business.

Net impact of COVID-19 related government subsidies. For the 13 and 52 weeks ended December 27, 2020, we received government subsidies of $2.7 million and $9.9 million, respectively. We elected to distribute a portion of the total benefit for the year to our employees in the form of a $3.7 million bonus, resulting in a net cost of $1.0 million for Q4 and a net benefit of $6.2 million for the fiscal year.

Other adjustments for the 13 and 52 weeks ended December 27, 2020 primarily include lease expense of $0.7 million incurred during the build-out phase of our Chicago office, amortization of software as a service assets of $0.6 million and $2.3 million, respectively, which is reported in selling, general and administrative expense, and implementation costs for cloud-based systems of $0.1 million and $0.9 million, respectively. For the 52 weeks ended December 27, 2020, these expenses were offset by a $6.3 million benefit from a reduction in expected costs to comply with the Affordable Care Act. Other adjustments for the 13 and 52 weeks ended December 29, 2019 primarily include implementation costs for cloud-based systems of $0.6 million and $3.2 million, respectively, and amortization of software as a service assets of $0.5 million and $1.6 million, respectively. For the 52 weeks ended December 29, 2019, these expenses were slightly offset by $3.9 million of workers’ compensation benefit related to additional insurance coverage associated with former workers’ compensation carriers that are in liquidation.

TRUEBLUE, INC.

NON-GAAP FINANCIAL MEASURES AND NON-GAAP RECONCILIATIONS

In addition to financial measures presented in accordance with U.S. GAAP, we monitor certain non-GAAP key financial measures. The presentation of these non-GAAP financial measures is used to enhance the understanding of certain aspects of our financial performance. It is not meant to be considered in isolation, superior to, or as a substitute for the directly comparable financial measures prepared in accordance with U.S. GAAP, and may not be comparable to similarly titled measures of other companies.

Non-GAAP Measure

Definition

Purpose of Adjusted Measures

EBITDA and Adjusted EBITDA

EBITDA excludes from net income (loss):

- interest expense and other income, net,

- income taxes, and

- depreciation and amortization.

Adjusted EBITDA, further excludes:

- Work Opportunity Tax Credit third-party processing fees,

- acquisition/integration costs,

- goodwill and intangible asset impairment charge,

- gain on deferred compensation assets,

- workforce reductions costs,

- COVID-19 government subsidies, and

- other adjustments, net.

- Enhances comparability on a consistent basis and provides investors with useful insight into the underlying trends of the business.

- Used by management to assess performance and effectiveness of our business strategies.

- Provides a measure, among others, used in the determination of incentive compensation for management.

Adjusted net income (loss) and Adjusted net income (loss) per diluted share

Net income (loss) and net income (loss) per diluted share, excluding:

- amortization of intangibles of acquired businesses,

- acquisition/integration costs,

- workforce reduction costs,

- COVID-19 government subsidies

- other adjustments, net,

- tax effect of each adjustment to U.S. GAAP net income (loss), and

- adjustment of income taxes to our normalized long-term expected tax rate for periods prior to Q2 2020.

- Enhances comparability on a consistent basis and provides investors with useful insight into the underlying trends of the business.

- Used by management to assess performance and effectiveness of our business strategies.

1.

RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME PER DILUTED SHARE
(Unaudited)

Q4 2020

Q4 2019

2020

2019

13 weeks ended

52 weeks ended

(in thousands, except for per share data)

Dec 27, 2020

Dec 29, 2019

Dec 27, 2020

Dec 29, 2019

Net income (loss)

$

8,026

$

8,715

$

(141,841

)

$

63,073

Amortization of intangible assets of acquired businesses

2,028

4,003

10,144

17,899

Acquisition/integration costs

—

(50

)

—

1,562

Goodwill and intangible asset impairment charge

—

—

175,189

—

Workforce reduction costs (1)

(19

)

2,829

12,570

3,301

COVID-19 government subsidies, net (2)

964

—

(6,211

)

—

Other adjustments, net (3)

1,667

1,084

(2,189

)

614

Tax effect of adjustments to net income (loss) (4)

(1,280

)

(1,102

)

(28,729

)

(3,273

)

Adjustment of income taxes to normalized effective rate (5)

—

(671

)

(3,719

)

(2,835

)

Adjusted net income

$

11,386

$

14,808

$

15,214

$

80,341

Adjusted net income per diluted share

$

0.33

$

0.39

$

0.43

$

2.05

Diluted weighted average shares outstanding

34,954

38,348

35,658

39,179

2.

RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA
(Unaudited)

Q4 2020

Q4 2019

2020

2019

13 weeks ended

52 weeks ended

(in thousands)

Dec 27, 2020

Dec 29, 2019

Dec 27, 2020

Dec 29, 2019

Net income (loss)

$

8,026

$

8,715

$

(141,841

)

$

63,073

Income tax expense (benefit)

3,059

638

(31,421

)

6,971

Interest expense and other (income), net

(1,943

)

(2,014

)

(1,620

)

(3,865

)

Depreciation and amortization

8,029

9,021

32,031

37,549

EBITDA

17,171

16,360

(142,851

)

103,728

Work Opportunity Tax Credit processing fees (6)

186

240

495

960

Acquisition/integration costs

—

(50

)

—

1,562

Goodwill and intangible asset impairment charge

—

—

175,189

—

Gain on deferred compensation assets (7)

1,725

495

1,725

495

Workforce reduction costs (1)

(19

)

2,829

12,570

3,301

COVID-19 government subsidies, net (2)

964

—

(6,211

)

—

Other adjustments, net (3)

1,667

1,084

(2,189

)

614

Adjusted EBITDA

$

21,694

$

20,958

$

38,728

$

110,660

Workforce reduction costs for the 13 and 52 weeks ended December 27, 2020 were primarily due to employee reductions as part of our cost management actions in response to COVID-19. For the 13 and 52 weeks ended December 29, 2019, the workforce reductions costs were primarily associated with employee reductions in the PeopleReady business.

Net impact of COVID-19 related government subsidies. For the 13 and 52 weeks ended December 27, 2020, we received government subsidies of $2.7 million and $9.9 million, respectively. We elected to distribute a portion of the total benefit for the year to our employees in the form of a $3.7 million bonus, resulting in a net cost of $1.0 million for Q4 and a net benefit of $6.2 million for the fiscal year.

Other adjustments for the 13 and 52 weeks ended December 27, 2020 primarily include lease expense of $0.7 million incurred during the build-out phase of our Chicago office, amortization of software as a service assets of $0.6 million and $2.3 million, respectively, which is reported in selling, general and administrative expense, and implementation costs for cloud-based systems of $0.1 million and $0.9 million, respectively. For the 52 weeks ended December 27, 2020, these expenses were offset by a $6.3 million benefit from a reduction in expected costs to comply with the Affordable Care Act. Other adjustments for the 13 and 52 weeks ended December 29, 2019 primarily include implementation costs for cloud-based systems of $0.6 million and $3.2 million, respectively, and amortization of software as a service assets of $0.5 million and $1.6 million, respectively. For the 52 weeks ended December 29, 2019, these expenses were slightly offset by $3.9 million of workers’ compensation benefit related to additional insurance coverage associated with former workers’ compensation carriers that are in liquidation.

Total tax effect of each of the adjustments to U.S. GAAP net income (loss) using the effective rate for the respective periods in 2020 and the expected long-term ongoing rate of 14 percent for Q4 and fiscal year 2019.

Adjustment of the effective income tax rate to the expected long-term ongoing rate of 14 percent for Q4 and fiscal year 2019. Beginning in Q2 2020, we decided not to adjust our GAAP tax rate in our adjusted net income (loss) calculation until our profitability rises to a more substantial level. Thus the adjustment for fiscal year 2020 relates to the Q1 2020 adjustment of the effective income tax rate to the long-term ongoing rate of 12 percent expected at that time.

These third-party processing fees are associated with generating the Work Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

Gain realized on sale of deferred compensation mutual funds to purchase corporate owned life insurance policies.