TrueBlue(TBI) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents TrueBlue, Inc.'s unaudited consolidated financial statements and management's discussion and analysis for the periods ended September 24, 2023 Consolidated Financial Statements (Unaudited) This section presents TrueBlue, Inc.'s unaudited consolidated financial statements, including the Balance Sheets, Statements of Operations and Comprehensive Income (Loss), and Statements of Cash Flows, along with detailed notes on significant accounting policies, fair value measurements, restricted cash and investments, and other financial disclosures for the periods ended September 24, 2023 Consolidated Balance Sheets The consolidated balance sheets reflect a decrease in total assets and liabilities, alongside a reduction in shareholders' equity, from December 2022 to September 2023 | Metric | Sep 24, 2023 (in thousands) | Dec 25, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | ASSETS | | | | Total current assets | $359,606 | $430,212 | | Total assets | $915,031 | $1,019,408 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $200,574 | $242,875 | | Total liabilities | $458,405 | $523,093 | | Total shareholders' equity | $456,626 | $496,315 | | Total liabilities and shareholders' equity | $915,031 | $1,019,408 | - Total assets decreased by approximately $104.4 million from December 25, 2022, to September 24, 2023, primarily driven by reductions in current assets like accounts receivable and cash[11] - Total liabilities decreased by approximately $64.7 million, mainly due to lower accounts payable, accrued expenses, and workers' compensation claims reserves[11] Consolidated Statements of Operations and Comprehensive Income (Loss) The statements of operations show a significant decline in revenue and a shift from net income to net loss for both the thirteen and thirty-nine-week periods ended September 24, 2023 | Metric | 13 Weeks Ended Sep 24, 2023 (in thousands) | 13 Weeks Ended Sep 25, 2022 (in thousands) | 39 Weeks Ended Sep 24, 2023 (in thousands) | 39 Weeks Ended Sep 25, 2022 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue from services | $473,196 | $575,721 | $1,414,072 | $1,696,489 | | Gross profit | $124,173 | $155,919 | $377,777 | $454,295 | | Income (loss) from operations | $(2,726) | $24,085 | $(15,225) | $65,327 | | Net income (loss) | $(10) | $20,696 | $(11,622) | $55,228 | | Basic EPS | $0.00 | $0.64 | $(0.37) | $1.67 | | Diluted EPS | $0.00 | $0.63 | $(0.37) | $1.65 | - For the thirteen weeks ended September 24, 2023, revenue from services decreased by 17.8% year-over-year, leading to a net loss of $10 thousand compared to a net income of $20.7 million in the prior year[13] - For the thirty-nine weeks ended September 24, 2023, the company reported a net loss of $11.6 million, a significant decline from the $55.2 million net income in the same period of the prior year, primarily due to decreased revenue and an impairment charge[13] Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate a substantial decrease in cash provided by operating activities and an increase in cash used in investing activities for the thirty-nine weeks ended September 24, 2023 | Cash Flow Activity | 39 Weeks Ended Sep 24, 2023 (in thousands) | 39 Weeks Ended Sep 25, 2022 (in thousands) | | :----------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $19,569 | $80,074 | | Net cash used in investing activities | $(26,556) | $(3,938) | | Net cash used in financing activities | $(37,329) | $(64,709) | | Net change in cash, cash equivalents and restricted cash | $(45,073) | $8,945 | | Cash, cash equivalents and restricted cash, end of period | $90,558 | $112,130 | - Net cash provided by operating activities significantly decreased to $19.6 million for the thirty-nine weeks ended September 24, 2023, from $80.1 million in the prior year, primarily due to lower net income[15] - Net cash used in investing activities increased to $26.6 million, driven by higher capital expenditures and purchases of restricted held-to-maturity investments[15] - Net cash used in financing activities decreased to $37.3 million, mainly due to reduced common stock repurchases[15] Notes to Consolidated Financial Statements These notes provide detailed disclosures on the company's accounting policies, fair value measurements, restricted cash, goodwill, workers' compensation, debt, commitments, equity, and income taxes NOTE 1: Summary of Significant Accounting Policies This note outlines the basis of financial statement preparation and the impact of new accounting standards - The financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information, with certain disclosures condensed or omitted[16] - No new accounting standards adopted during the thirty-nine weeks ended September 24, 2023, had a material impact, and no unadopted standards are expected to have a significant impact[19][20] NOTE 2: Fair Value Measurement This note details the fair value of financial assets and liabilities, including impairment charges recognized during the period | Asset Category | Sep 24, 2023 Total Fair Value (in thousands) | Dec 25, 2022 Total Fair Value (in thousands) | | :--------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Cash, cash equivalents and restricted cash | $90,558 | $135,631 | | Restricted investments classified as held-to-maturity | $121,050 | $119,525 | - The company recognized a non-cash goodwill impairment charge of $8.9 million for the PeopleScout MSP reporting unit and a $0.6 million impairment charge for a trade name/trademark in the PeopleManagement segment for the thirty-nine weeks ended September 24, 2023[25][26] NOTE 3: Restricted Cash and Investments This note provides a breakdown of restricted cash and investments, primarily held as collateral for insurance and workers' compensation programs | Category | Sep 24, 2023 (in thousands) | Dec 25, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Cash collateral held by insurance carriers | $24,727 | $29,567 | | Cash and cash equivalents held in Trust | $17,842 | $30,857 | | Investments held in Trust | $125,379 | $123,678 | | Company-owned life insurance policies | $30,005 | $26,479 | | Other restricted cash and cash equivalents | $876 | $3,153 | | Total restricted cash and investments | $198,829 | $213,734 | - Restricted cash and investments primarily serve as collateral for workers' compensation and state workers' compensation programs, with the majority held in a trust[28] - Unrealized gains related to company-owned life insurance policies were $1.482 million for the thirty-nine weeks ended September 24, 2023, compared to unrealized losses of $7.076 million in the prior year[30] NOTE 4: Supplemental Balance Sheet Information This note provides additional details on accounts receivable allowance and other current assets | Metric | 39 Weeks Ended Sep 24, 2023 (in thousands) | 39 Weeks Ended Sep 25, 2022 (in thousands) | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | | Accounts receivable allowance (beginning balance) | $3,212 | $6,687 | | Current period provision | $3,254 | $3,352 | | Write-offs | $(3,702) | $(6,731) | | Accounts receivable allowance (ending balance) | $2,762 | $3,286 | | Category | Sep 24, 2023 (in thousands) | Dec 25, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Prepaid software agreements | $8,626 | $9,994 | | Other prepaid expenses | $8,640 | $9,455 | | Other current assets | $5,755 | $13,081 | | Total prepaid expenses and other current assets | $23,021 | $32,530 | NOTE 5: Goodwill and Intangible Assets This note details the changes in goodwill and intangible assets, including impairment charges recognized during the period | Segment | Goodwill, net (Dec 25, 2022) (in thousands) | Impairment charge (in thousands) | Goodwill, net (Sep 24, 2023) (in thousands) | | :----------------- | :---------------------------------------- | :------------------------------- | :---------------------------------------- | | PeopleReady | $60,094 | — | $60,094 | | PeopleScout | $32,199 | $(8,885) | $23,168 | | PeopleManagement | $1,491 | — | $1,491 | | Total company | $93,784 | $(8,885) | $84,753 | - A non-cash goodwill impairment charge of $8.9 million was recorded for the PeopleScout MSP reporting unit due to revised internal revenue projections and a strategic lack of technology investment in a competitive market[35] - A non-cash impairment charge of $0.6 million was recorded for a trade name/trademark in the PeopleManagement segment, primarily due to an increased discount rate and lower projected revenues[38] NOTE 6: Workers' Compensation Insurance and Reserves This note describes the company's self-insurance program for workers' compensation and the associated reserve balances - The company is substantially self-insured for workers' compensation claims, with policies covering claims above a $5.0 million deductible limit[41] | Metric | Sep 24, 2023 (in thousands) | Dec 25, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Undiscounted workers' compensation reserve | $237,242 | $270,468 | | Less discount on workers' compensation reserve | $19,790 | $19,458 | | Workers' compensation reserve, net of discount | $217,452 | $251,010 | | Long-term portion | $173,361 | $201,005 | - Workers' compensation cost for the thirty-nine weeks ended September 24, 2023, was $18.5 million, a decrease from $28.0 million in the prior year[45] NOTE 7: Long-Term Debt This note outlines the company's revolving credit facility and its compliance with financial covenants - The company has a $300.0 million Revolving Credit Facility, maturing on March 16, 2025, with an option to increase to $450.0 million[46] - As of September 24, 2023, $7.2 million was utilized by standby letters of credit, leaving $292.8 million unused, with $123.0 million available for additional borrowing due to the most restrictive covenant[46] - The company was in compliance with all financial covenants, including a consolidated leverage ratio of 0.17 (less than 3.00) and a consolidated fixed charge coverage ratio of 27.83 (greater than 1.25)[51][52] NOTE 8: Commitments and Contingencies This note details the company's collateral commitments and its assessment of legal proceedings | Commitment Type | Sep 24, 2023 (in thousands) | Dec 25, 2022 (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Cash collateral held by workers' compensation insurance carriers | $18,872 | $23,716 | | Cash and cash equivalents held in Trust | $17,842 | $30,857 | | Investments held in Trust | $125,379 | $123,678 | | Letters of credit | $6,077 | $6,077 | | Surety bonds | $20,725 | $20,806 | | Total collateral commitments | $188,895 | $205,134 | - Total collateral commitments decreased by $16.2 million during the thirty-nine weeks ended September 24, 2023, primarily due to reduced collateral requirements from insurance carriers and the use of collateral for workers' compensation claims[103] - The company believes that liabilities for legal proceedings are immaterial and that the aggregate range of reasonably possible losses in excess of accrued amounts is also immaterial[55] NOTE 9: Shareholders' Equity This note provides a summary of changes in shareholders' equity, including common stock shares and retained earnings | Metric | 39 Weeks Ended Sep 24, 2023 (in thousands) | 39 Weeks Ended Sep 25, 2022 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Common stock shares (beginning balance) | 32,730 | 34,861 | | Common stock shares (ending balance) | 31,109 | 32,693 | | Retained earnings (beginning balance) | $516,332 | $508,813 | | Net income (loss) | $(11,622) | $55,228 | | Purchases and retirement of common stock | $(34,178) | $(60,939) | | Total shareholders' equity ending balance | $456,626 | $486,814 | - Shareholders' equity decreased from $496.3 million at December 25, 2022, to $456.6 million at September 24, 2023, influenced by net loss and common stock repurchases[11][57] - The company repurchased $34.2 million of common stock during the thirty-nine weeks ended September 24, 2023[112] NOTE 10: Income Taxes This note explains the effective income tax rate and the factors contributing to its difference from the statutory federal rate - The effective income tax rate for the thirty-nine weeks ended September 24, 2023, was 12.2%, lower than the statutory federal rate of 21.0%[59] - The difference in the effective tax rate was primarily due to a non-deductible goodwill impairment charge and the federal Work Opportunity Tax Credit (WOTC)[59][89] | Tax Impact Factor | 39 Weeks Ended Sep 24, 2023 (%) | 39 Weeks Ended Sep 25, 2022 (%) | | :------------------------------------ | :------------------------------ | :------------------------------ | | Federal income tax expense (benefit) at statutory rate | 21.0% | 21.0% | | State income taxes, net of federal benefit | 3.3% | 4.2% | | Non-deductible goodwill impairment charge | (17.3)% | — | | Hiring tax credits, net | 12.0% | (9.8)% | | Non-deductible and non-taxable items | (2.8)% | 3.0% | | Stock-based compensation | (4.7)% | (0.9)% | | Other, net | 0.7% | (0.6)% | | Income tax expense (benefit) | 12.2% | 16.9% | NOTE 11: Net Income (Loss) Per Share This note presents the basic and diluted net income (loss) per share for the thirteen and thirty-nine-week periods | Metric | 13 Weeks Ended Sep 24, 2023 | 13 Weeks Ended Sep 25, 2022 | 39 Weeks Ended Sep 24, 2023 | 39 Weeks Ended Sep 25, 2022 | | :------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) (in thousands) | $(10) | $20,696 | $(11,622) | $55,228 | | Weighted average common shares (basic, in thousands) | 30,932 | 32,434 | 31,397 | 33,023 | | Weighted average common shares (diluted, in thousands) | 30,932 | 32,818 | 31,397 | 33,511 | | Basic EPS | $0.00 | $0.64 | $(0.37) | $1.67 | | Diluted EPS | $0.00 | $0.63 | $(0.37) | $1.65 | - Diluted EPS for the thirteen weeks ended September 24, 2023, was $0.00, down from $0.63 in the prior year, reflecting the net loss[60] - For the thirty-nine weeks ended September 24, 2023, diluted EPS was $(0.37), a significant decrease from $1.65 in the prior year[60] NOTE 12: Segment Information This note provides financial information by reportable segment, including revenue and profit contributions - TrueBlue operates through three reportable segments: PeopleReady (blue-collar contingent staffing), PeopleScout (RPO, MSP, and talent advisory services), and PeopleManagement (contingent labor and outsourced industrial workforce solutions)[61][62][63] | Segment | 13 Weeks Ended Sep 24, 2023 Revenue (in thousands) | 13 Weeks Ended Sep 25, 2022 Revenue (in thousands) | 39 Weeks Ended Sep 24, 2023 Revenue (in thousands) | 39 Weeks Ended Sep 25, 2022 Revenue (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | PeopleReady | $283,187 | $334,639 | $811,133 | $958,272 | | PeopleManagement | $137,065 | $163,618 | $420,809 | $489,375 | | PeopleScout | $52,944 | $77,464 | $182,130 | $248,842 | | Total company | $473,196 | $575,721 | $1,414,072 | $1,696,489 | | Segment | 13 Weeks Ended Sep 24, 2023 Profit (in thousands) | 13 Weeks Ended Sep 25, 2022 Profit (in thousands) | 39 Weeks Ended Sep 24, 2023 Profit (in thousands) | 39 Weeks Ended Sep 25, 2022 Profit (in thousands) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | PeopleReady | $9,656 | $28,732 | $18,686 | $65,276 | | PeopleManagement | $2,134 | $4,463 | $4,182 | $11,670 | | PeopleScout | $6,272 | $10,707 | $24,012 | $42,272 | | Total segment profit | $18,062 | $43,902 | $46,880 | $119,218 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on TrueBlue's financial performance and condition, highlighting the impact of economic uncertainty on revenue and profitability across its segments. It details the results of operations for the thirteen and thirty-nine weeks ended September 24, 2023, including revenue declines, gross profit changes, SG&A expenses, and impairment charges, alongside an outlook for the fiscal fourth quarter and a discussion of liquidity and critical accounting estimates Comment on Forward-Looking Statements This section advises that the report contains forward-looking statements subject to risks and uncertainties, with no duty to update them - The report contains forward-looking statements subject to risks and uncertainties, and the company undertakes no duty to update them[66] Business Overview TrueBlue is a leading provider of specialized workforce solutions, leveraging digital strategies to enhance client and employee engagement and reduce service delivery costs across its three core segments - TrueBlue is a leading provider of specialized workforce solutions, with client demand heavily influenced by economic strength and labor market trends[67] - The company is committed to digital strategies to attract and retain clients and employees, and reduce service delivery costs across its PeopleReady, PeopleScout, and PeopleManagement segments[67] PeopleReady PeopleReady specializes in providing on-demand and skilled blue-collar labor across various industries, utilizing its JobStack mobile app for efficient service delivery - PeopleReady provides on-demand and skilled blue-collar labor across various industries, leveraging its mobile app JobStack for digital exchange and improved service delivery[68] PeopleScout PeopleScout offers RPO, MSP solutions, and talent advisory services, employing its proprietary AI/machine learning platform Affinix for rapid talent sourcing - PeopleScout offers RPO, MSP solutions, and talent advisory services, utilizing its proprietary AI/machine learning platform Affinix for rapid talent sourcing[69] PeopleManagement PeopleManagement delivers on-site management and recruitment for contingent industrial workforces and dedicated commercial drivers through its Centerline Drivers brand - PeopleManagement provides on-site management and recruitment for contingent industrial workforces and dedicated commercial drivers through its Centerline Drivers brand[70] Fiscal Third Quarter of 2023 Summary The fiscal third quarter of 2023 saw a significant revenue decline and a net loss, primarily due to economic uncertainty, despite the company maintaining substantial liquidity - Total company revenue declined 17.8% to $473.2 million for the thirteen weeks ended September 24, 2023, due to economic uncertainty impacting demand across all segments[71] - Gross profit as a percentage of revenue decreased by 90 basis points to 26.2%, driven by a shift towards lower-margin staffing businesses[72] - The company reported a net loss of $0.0 million for the quarter, compared to a net income of $20.7 million in the prior year[74] - As of September 24, 2023, the company had $47.1 million in cash and cash equivalents, no debt, and $123.0 million available under its revolving credit agreement, totaling $170.1 million in liquidity[74] Results of Operations This section analyzes the company's financial performance, detailing revenue, gross profit, SG&A expenses, and impairment charges for the reported periods Total Company Results The total company results show a decline in revenue and a shift to net loss for both the thirteen and thirty-nine-week periods ended September 24, 2023 | Metric | 13 Weeks Ended Sep 24, 2023 | 13 Weeks Ended Sep 25, 2022 | 39 Weeks Ended Sep 24, 2023 | 39 Weeks Ended Sep 25, 2022 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue from services (in thousands) | $473,196 | $575,721 | $1,414,072 | $1,696,489 | | Gross profit % of revenue | 26.2% | 27.1% | 26.7% | 26.8% | | SG&A expense % of revenue | 25.5% | 21.6% | 25.8% | 21.6% | | Income (loss) from operations (in thousands) | $(2,726) | $24,085 | $(15,225) | $65,327 | | Net income (loss) (in thousands) | $(10) | $20,696 | $(11,622) | $55,228 | | Diluted EPS | $0.00 | $0.63 | $(0.37) | $1.65 | Revenue from Services Revenue from services experienced an overall decline across all segments due to economic uncertainty, prompting clients to reduce outsourced labor and manage costs | Segment | 13 Weeks Ended Sep 24, 2023 Revenue (in thousands) | YoY Growth (Decline) % | 39 Weeks Ended Sep 24, 2023 Revenue (in thousands) | YoY Growth (Decline) % | | :---------------- | :--------------------------------------- | :--------------------- | :--------------------------------------- | :--------------------- | | PeopleReady | $283,187 | (15.4)% | $811,133 | (15.4)% | | PeopleScout | $52,944 | (31.7)% | $182,130 | (26.8)% | | PeopleManagement | $137,065 | (16.2)% | $420,809 | (14.0)% | | Total company | $473,196 | (17.8)% | $1,414,072 | (16.6)% | - Overall revenue decline was primarily due to continued economic uncertainty, leading clients to reduce reliance on outsourced labor and manage costs[76] PeopleReady Revenue PeopleReady revenue declined by 15.4% for both the thirteen and thirty-nine-week periods, as clients reduced variable labor amidst economic uncertainty - PeopleReady revenue declined 15.4% for both the thirteen and thirty-nine weeks ended September 24, 2023, as clients reduced variable labor to manage costs amid economic uncertainty[77] PeopleScout Revenue PeopleScout revenue declined significantly by 31.7% and 26.8% for the thirteen and thirty-nine-week periods, respectively, as clients reduced hiring volumes due to economic uncertainty - PeopleScout revenue declined 31.7% for the thirteen weeks and 26.8% for the thirty-nine weeks ended September 24, 2023, as clients responded to economic uncertainty by reducing hiring volumes and initiating hiring freezes[78] PeopleManagement Revenue PeopleManagement revenue declined by 16.2% and 14.0% for the thirteen and thirty-nine-week periods, respectively, as clients reduced their dependence on variable labor - PeopleManagement revenue declined 16.2% for the thirteen weeks and 14.0% for the thirty-nine weeks ended September 24, 2023, as clients reduced dependence on variable labor[79] Gross Profit Gross profit as a percentage of revenue declined due to unfavorable revenue shifts towards lower-margin businesses and higher workers' compensation costs, partially offset by disciplined pricing - Gross profit as a percentage of revenue declined 90 basis points to 26.2% for the thirteen weeks ended September 24, 2023, primarily due to unfavorable revenue shifts towards lower-margin staffing businesses and higher workers' compensation costs, partially offset by disciplined pricing[80] - For the thirty-nine weeks, gross profit as a percentage of revenue declined 10 basis points to 26.7%, with contraction from revenue mix partially offset by lower workers' compensation costs and higher bill rates[81] SG&A Expense SG&A expense decreased for both periods due to cost-cutting measures, partially offset by inflation in employee medical benefits and executive leadership transition costs - Total company SG&A expense decreased by $3.6 million (2.9%) for the thirteen weeks ended September 24, 2023, due to $12 million in cost-cutting measures, partially offset by inflation in employee medical benefits and $2.5 million in executive leadership transition costs[82] - For the thirty-nine weeks, SG&A expense decreased by $2.3 million (0.6%), with $17 million in cost savings offset by inflation, executive transition costs, and a prior-year benefit from a compensation accrual reversal[83] Depreciation and Amortization Depreciation and amortization decreased for both the thirteen and thirty-nine-week periods as certain assets became fully depreciated or amortized in the prior year - Depreciation and amortization decreased for both the thirteen and thirty-nine weeks ended September 24, 2023, compared to prior periods, as certain assets became fully depreciated or amortized in 2022[84] Goodwill and Intangible Asset Impairment Charge The company recorded significant non-cash impairment charges for goodwill and a trade name/trademark due to revised projections and market conditions | Asset Type | Segment | 39 Weeks Ended Sep 24, 2023 Impairment Charge (in thousands) | | :-------------------- | :-------------- | :------------------------------------------------------- | | Goodwill | PeopleScout | $8,885 | | Trade names/trademark | PeopleManagement | $600 | | Total | | $9,485 | - An $8.9 million goodwill impairment charge was recorded for PeopleScout MSP due to revised revenue projections and underperformance from a lack of technology investment[86] - A $0.6 million impairment charge was recorded for a PeopleManagement trade name/trademark, driven by an increased discount rate and lower projected revenues[87] Income Tax Expense The effective income tax rate for the thirty-nine weeks ended September 24, 2023, was 12.2%, primarily influenced by a non-deductible goodwill impairment charge and the Work Opportunity Tax Credit - The effective income tax rate for the thirty-nine weeks ended September 24, 2023, was 12.2%, influenced by a non-deductible goodwill impairment charge and the Work Opportunity Tax Credit (WOTC)[88][89][90] | Tax Impact Factor | 13 Weeks Ended Sep 24, 2023 (%) | 13 Weeks Ended Sep 25, 2022 (%) | 39 Weeks Ended Sep 24, 2023 (%) | 39 Weeks Ended Sep 25, 2022 (%) | | :------------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Federal income tax expense (benefit) at statutory rate | 21.0% | 21.0% | 21.0% | 21.0% | | State income taxes, net of federal benefit | (4.6)% | 5.0% | 3.3% | 4.2% | | Non-deductible goodwill impairment charge | — | — | (17.3)% | — | | Hiring tax credits, net | 123.9% | (10.8)% | 12.0% | (9.8)% | | Income tax expense (benefit) | 99.6% | 16.5% | 12.2% | 16.9% | Segment Performance Segment profit is evaluated based on revenue, cost of services, and direct operating expenses, excluding impairment charges, depreciation, unallocated corporate expenses, and other non-ongoing costs - Segment profit is evaluated based on revenue, cost of services, and direct operating expenses, excluding impairment charges, depreciation, unallocated corporate expenses, and other non-ongoing costs[92] PeopleReady Segment Performance PeopleReady segment profit declined significantly due to decreased revenue, high fixed-to-variable SG&A costs, and a shift towards lower-margin renewable energy business | Metric | 13 Weeks Ended Sep 24, 2023 | 13 Weeks Ended Sep 25, 2022 | 39 Weeks Ended Sep 24, 2023 | 39 Weeks Ended Sep 25, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue from services (in thousands) | $283,187 | $334,639 | $811,133 | $958,272 | | Segment profit (in thousands) | $9,656 | $28,732 | $18,686 | $65,276 | | Segment profit % of revenue | 3.4% | 8.6% | 2.3% | 6.8% | - PeopleReady segment profit declined significantly due to decreased revenue, high fixed-to-variable SG&A costs, and a shift towards lower-margin renewable energy business[93] PeopleScout Segment Performance PeopleScout segment profit declined due to reduced revenue, though workforce reductions helped mitigate the impact on operating costs | Metric | 13 Weeks Ended Sep 24, 2023 | 13 Weeks Ended Sep 25, 2022 | 39 Weeks Ended Sep 24, 2023 | 39 Weeks Ended Sep 25, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue from services (in thousands) | $52,944 | $77,464 | $182,130 | $248,842 | | Segment profit (in thousands) | $6,272 | $10,707 | $24,012 | $42,272 | | Segment profit % of revenue | 11.8% | 13.8% | 13.2% | 17.0% | - PeopleScout segment profit declined due to reduced revenue, though workforce reductions helped mitigate the impact on operating costs[94] PeopleManagement Segment Performance PeopleManagement segment profit declined due to decreased revenue and the associated impact of higher operating leverage, despite cost reduction actions | Metric | 13 Weeks Ended Sep 24, 2023 | 13 Weeks Ended Sep 25, 2022 | 39 Weeks Ended Sep 24, 2023 | 39 Weeks Ended Sep 25, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue from services (in thousands) | $137,065 | $163,618 | $420,809 | $489,375 | | Segment profit (in thousands) | $2,134 | $4,463 | $4,182 | $11,670 | | Segment profit % of revenue | 1.6% | 2.7% | 1.0% | 2.4% | - PeopleManagement segment profit declined due to decreased revenue and the associated impact of higher operating leverage, despite cost reduction actions[95] Future Outlook The company projects a revenue decline for Q4 2023 due to macroeconomic uncertainty, with an expected income tax benefit from hiring tax credits - The fiscal fourth quarter of 2023 will include a 14th week, expected to add $17 million to $22 million in revenue but contribute a small net loss due to slow demand during holidays[97] - Revenue for Q4 2023 (on a comparable 13-week basis) is projected to decline between 19% and 15% year-over-year due to continued macroeconomic uncertainty[98] - Gross profit as a percentage of revenue is anticipated to remain relatively consistent for Q4 2023 compared to the prior year[98] - An income tax benefit between $4 million and $6 million is expected for Q4 2023, primarily from hiring tax credits[98] Liquidity and Capital Resources The company maintains strong liquidity with significant cash and available credit, focusing on working capital, capital expenditures, and strategic technology investments - As of September 24, 2023, the company had $47.1 million in cash and cash equivalents, no debt, and $123.0 million available under its Revolving Credit Facility, totaling $170.1 million in liquidity[99] - Primary cash needs include working capital, capital expenditures, Revolving Credit Facility repayment, and share repurchases[100] - Investments are ongoing in online/mobile apps and cloud-based back-office technology to enhance competitive differentiation and operational efficiency[101] - Total collateral commitments for workers' compensation decreased by $16.2 million during the thirty-nine-week period, due to reduced requirements and use of collateral for claims[103] Summary of Critical Accounting Estimates This section outlines the company's critical accounting estimates, particularly concerning goodwill and intangible assets, which involve significant judgment and assumptions Goodwill and Indefinite-Lived Intangible Assets Goodwill and indefinite-lived intangible assets are evaluated for impairment annually and when events or circumstances indicate potential impairment - Goodwill and indefinite-lived intangible assets are evaluated for impairment annually and when events or circumstances indicate potential impairment[115][125] Goodwill Goodwill impairment testing is performed at the reporting unit level, involving significant estimates and judgments in fair value measurement - Goodwill impairment testing is performed at the reporting unit level (PeopleReady, PeopleManagement Centerline, PeopleScout RPO, PeopleScout MSP)[116] - The fair value of reporting units is estimated using a weighting of income and market valuation approaches, with significant estimates and judgments involved[119] - A non-cash goodwill impairment charge of $8.9 million was recorded for the PeopleScout MSP reporting unit due to revised revenue projections and underperformance[122] Indefinite-Lived Intangible Assets Indefinite-lived intangible assets, such as trade names and trademarks, are evaluated for impairment using the relief from royalty method - Indefinite-lived intangible assets (trade names/trademarks) are evaluated for impairment using the relief from royalty method[127] - A non-cash impairment charge of $0.6 million was recorded for a PeopleManagement trade name/trademark due to an increased discount rate and lower projected revenues[128] Finite-Lived Intangible Assets and Other Long-Lived Assets Finite-lived intangible assets and other long-lived assets are reviewed for impairment when circumstances indicate that their carrying value may not be recoverable - Finite-lived intangible assets and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable[131] - No impairment was identified for finite-lived intangible assets or other long-lived assets during the thirteen or thirty-nine weeks ended September 24, 2023[132] New Accounting Standards This section refers to Note 1 for details on new accounting standards, indicating no material impact from recently adopted or unadopted standards - Refer to Note 1 for details on new accounting standards, indicating no material impact from recently adopted standards and no significant impact expected from unadopted standards[133] Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's quantitative and qualitative disclosures about market risk since its Annual Report on Form 10-K for the fiscal year ended December 25, 2022 - No material changes in quantitative and qualitative disclosures about market risk since the prior fiscal year's 10-K[134] Controls and Procedures Management concluded that TrueBlue's disclosure controls and procedures were effective at a reasonable assurance level as of September 24, 2023. There were no material changes in internal control over financial reporting during the fiscal third quarter of 2023 - Disclosure controls and procedures were effective at a reasonable assurance level as of September 24, 2023[136] - No material changes in internal control over financial reporting occurred during the fiscal third quarter of 2023[137] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and an index to exhibits Legal Proceedings This section refers to Note 8 of the consolidated financial statements for details on legal proceedings, indicating that the company believes liabilities for such matters are immaterial - Legal proceedings are discussed in Note 8, with liabilities believed to be immaterial[139] Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 25, 2022 - No material changes to risk factors previously disclosed in the Annual Report on Form 10-K[140] Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's common stock repurchases during the thirteen weeks ended September 24, 2023, including shares purchased to satisfy employee tax withholding obligations and the remaining authorization under the share repurchase program | Period | Total Shares Purchased (1) | Weighted Average Price Paid Per Share (2) | Approximate Dollar Value Remaining Under Program (3) | | :-------------------------- | :------------------------- | :---------------------------------------- | :--------------------------------------------------- | | 6/26/2023 through 7/23/2023 | 3,067 | $17.73 | $55.1 million | | 7/24/2023 through 8/20/2023 | 2,647 | $15.25 | $55.1 million | | 8/21/2023 through 9/24/2023 | 891 | $15.10 | $55.1 million | | Total | 6,605 | $16.38 | | - 6,605 shares were purchased to satisfy employee tax withholding obligations upon vesting of restricted stock, not under the publicly announced repurchase program[142] - As of September 24, 2023, $55.1 million remains available for repurchase under the existing share repurchase authorization[143] Defaults Upon Senior Securities This item is marked as 'Not applicable,' indicating no defaults upon senior securities - No defaults upon senior securities[144] Mine Safety Disclosures This item is marked as 'Not applicable,' indicating no mine safety disclosures are required - No mine safety disclosures are applicable[145] Other Information This section states that none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal third quarter of 2023 - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal third quarter of 2023[146] Index to Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, employment agreements, certifications, and financial statements formatted as Inline XBRL - Includes certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and financial statements formatted as Inline XBRL (Exhibit 101)[147] SIGNATURES This section contains the signatures of TrueBlue, Inc.'s Chief Executive Officer and President, Chief Financial Officer and Executive Vice President, and Chief Accounting Officer, Treasurer and Senior Vice President, certifying the filing of the report on October 23, 2023 - The report was signed by Taryn R. Owen (CEO and President), Derrek L. Gafford (CFO and Executive Vice President), and Richard B. Christensen (Chief Accounting Officer, Treasurer and Senior Vice President) on October 23, 2023[150]