TrueBlue(TBI) - 2023 Q4 - Annual Report

Part I Business TrueBlue, Inc. provides specialized workforce solutions through three segments, connecting 464,000 people with work in 2023 Business Overview In fiscal 2023, TrueBlue connected 464,000 people with work for 67,000 clients across its three core segments 2023 Operational Highlights by Segment | Segment | People Connected with Work | Key Services | | :--- | :--- | :--- | | PeopleReady | ~195,000 | General temporary, temp-to-hire, skilled trades | | PeopleScout | ~224,000 | Recruitment Process Outsourcing (RPO), Managed Service Provider (MSP) | | PeopleManagement | ~45,000 | On-site contingent staffing, commercial driver services | - The company utilizes proprietary technology platforms to enhance service delivery across its segments: JobStack for PeopleReady, Affinix for PeopleScout, and Stafftrack for PeopleManagement's on-site services[19][21][32] Business Strategy The company's strategy focuses on organic growth through technology investments to enhance client and associate experience and improve profitability - A core part of the strategy is continued investment in technology platforms like JobStack, Stafftrack, and Affinix to differentiate services and improve efficiency[30][32] - The fiscal 2024 strategy emphasizes accelerating business growth, enhancing profitability, and simplifying the operating structure to improve operational excellence and innovation[32] Competition The staffing and human resource outsourcing industries are highly fragmented and competitive, with TrueBlue competing on price, speed, quality, and technology - The staffing industry is large, highly fragmented, and includes competition from local, regional, national, and online/app-based companies[33] - Significant competitive factors are price, ability to promptly fill orders, quality of associates, and technology tools[33] - TrueBlue's competitive differentiators include its specialized industry approach, national presence, investment in technology, and proprietary mobile apps[35] Clients In fiscal 2023, TrueBlue served approximately 67,000 clients, with the top ten accounting for 20.5% of total revenue Top 10 Client Revenue Concentration | Fiscal Year | % of Total Revenue | | :--- | :--- | | 2023 | 20.5% | | 2022 | 19.2% | | 2021 | 17.2% | - No single client accounted for more than 10.0% of total company revenue in fiscal 2023, 2022, or 2021[38] Human Capital Management As of December 31, 2023, TrueBlue employed approximately 5,000 FTEs globally, emphasizing DEI, talent development, and associate safety - The company employed approximately 5,000 FTE employees as of December 31, 2023, with about 3,700 in North America[41] - As of year-end 2023, approximately 64% of the global FTE employee population and 48% of directors and above were female. 78% of the Board is comprised of members from under-represented groups[50] - The company has a strong focus on associate safety, with an integrated risk management program, employee incentive compensation tied to safety metrics, and client site visits to address safety risks[54] Risk Factors The company faces significant operational, financial, legal, industry, and cybersecurity risks, including economic dependency and technology failure - Operational Risk: Demand for workforce solutions is highly dependent on economic conditions, and a slowdown can significantly decrease revenues and profits[60] - Technology Risk: Failure to invest in and improve technology to meet client and associate expectations, especially with the rise of AI and online platforms, could negatively impact financial results[63][64] - Insurance Risk: The business is dependent on obtaining workers' compensation insurance at reasonable terms, and unexpected changes could negatively impact financial condition[66] - Cybersecurity Risk: The business requires storing confidential information, making systems vulnerable to security breaches which could lead to litigation, financial loss, and reputational harm[96][97] - Regulatory Risk: The workforce solutions industry is subject to extensive and changing government regulations, which could increase costs and harm future earnings[89] Cybersecurity TrueBlue manages cybersecurity risks through a NIST-aligned, ISO 27001 certified program, with Board oversight and no material incidents in three years - The company's cybersecurity risk management approach is aligned with the National Institute of Standards and Technology (NIST) and is ISO 27001 certified[114] - The Innovation and Technology (I&T) Committee of the Board, comprising all board members, is responsible for overseeing cybersecurity risks and receives quarterly updates from management[121] - In the last three fiscal years, the company has not experienced any cybersecurity incidents that have materially impacted its business strategy, results of operations, or financial condition[119] Properties TrueBlue owns its Tacoma corporate headquarters and two Florida branches, leasing most other locations, and utilizes a remote/hybrid work model - The company owns its corporate headquarters in Tacoma, Washington, but leases the vast majority of its branch and office spaces[123] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities TrueBlue's common stock trades on the NYSE, with $55.1 million remaining for share repurchases and no cash dividends declared to date - As of December 31, 2023, $55.1 million remains available for repurchase under the company's $100.0 million share repurchase program authorized in January 2022[132] - No cash dividends have been declared on common stock to date[129] Management's Discussion and Analysis of Financial Condition and Results of Operations TrueBlue's fiscal 2023 revenue declined 15.4% to $1.9 billion, resulting in a net loss of $14.2 million amid economic uncertainty Results of Operations Fiscal 2023 revenue decreased 15.4% to $1.9 billion across all segments, leading to a $14.2 million net loss and a 20 basis point gross margin contraction Fiscal 2023 Financial Highlights (vs. 2022) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1,906.2M | $2,254.2M | -15.4% | | Gross Profit | $506.1M | $602.1M | -16.0% | | Gross Margin | 26.5% | 26.7% | -20 bps | | Income (Loss) from Operations | ($23.9M) | $72.2M | -133.0% | | Net Income (Loss) | ($14.2M) | $62.3M | -122.7% | | Diluted EPS | ($0.45) | $1.86 | -124.2% | Fiscal 2023 Revenue by Segment (vs. 2022) | Segment | 2023 Revenue | 2022 Revenue | Change | | :--- | :--- | :--- | :--- | | PeopleReady | $1,096.3M | $1,272.9M | -13.9% | | PeopleScout | $229.3M | $317.5M | -27.8% | | PeopleManagement | $580.6M | $663.8M | -12.5% | - A non-cash goodwill and intangible asset impairment charge of $9.5 million was recorded in fiscal 2023, primarily within the PeopleScout MSP reporting unit[144][155] Future Outlook For Q1 2024, revenue is expected to decline 10-16% year-over-year, with gross profit margin decreasing due to business mix and higher workers' compensation expense - Q1 2024 revenue is expected to decline between 10% and 16% year-over-year[168] - Q1 2024 gross profit as a percentage of revenue is expected to decline between 170 and 210 basis points compared to the prior year period[168] - Full-year 2024 capital expenditures are expected to be between $23 million and $27 million[168] Liquidity and Capital Resources As of December 31, 2023, TrueBlue maintained strong liquidity with $61.9 million in cash and no debt, with a new $255.0 million revolving credit facility secured in February 2024 Cash Flow Summary (Fiscal Year Ended Dec 31, 2023) | Cash Flow Activity | Amount (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $34,754 | | Net cash used in investing activities | ($32,322) | | Net cash used in financing activities | ($37,583) | - At year-end 2023, the company had $61.9 million in cash, no outstanding debt, and total liquidity of $147.8 million[145][169] - In February 2024, the company entered into a new five-year, $255.0 million revolving credit facility, replacing the previous one[170] Summary of Critical Accounting Estimates Critical accounting estimates include workers' compensation reserves, credit loss allowances, business combinations, and goodwill impairment, with an $8.9 million goodwill charge in 2023 - Key critical accounting estimates include workers' compensation reserves, allowance for credit losses, business combinations, and impairment of goodwill and intangible assets[185] - The workers' compensation reserve is a significant estimate, with a 5% change in claim factors for fiscal 2023 potentially impacting costs by approximately $2 million[188] - The 2023 annual goodwill impairment test resulted in an $8.9 million charge for the PeopleScout MSP reporting unit due to revised, lower revenue projections and a strategic lack of technology investment[201] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risk from interest rate changes and foreign currency fluctuations but does not use derivative financial instruments for hedging - Primary market risks are related to interest rate changes affecting the investment portfolio and revolving credit facility, and foreign currency exchange rate fluctuations[215] - The company does not currently use derivative financial instruments to hedge market risks[215] Financial Statements and Supplementary Data This section presents TrueBlue's audited consolidated financial statements for fiscal 2023, with an unqualified auditor's opinion on both financials and internal controls Consolidated Financial Statements The consolidated financial statements for fiscal 2023 report total assets of $899.4 million, a net loss of $14.2 million, and $34.8 million in operating cash flow Consolidated Balance Sheet Highlights (As of Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $354,993 | | Total Assets | $899,383 | | Total Current Liabilities | $204,099 | | Total Liabilities | $441,510 | | Total Shareholders' Equity | $457,873 | Consolidated Statement of Operations Highlights (Fiscal Year 2023) | Account | Amount (in thousands) | | :--- | :--- | | Revenue from services | $1,906,243 | | Gross profit | $506,059 | | Income (loss) from operations | ($23,850) | | Net income (loss) | ($14,173) | Notes to Consolidated Financial Statements The notes detail significant accounting policies, including the $8.9 million goodwill impairment, workers' compensation reserves, and the classification of the Canadian subsidiary as held-for-sale - The company's Canadian subsidiary, Labour Ready Temporary Services, Ltd. (LRTS), was classified as held-for-sale as of December 31, 2023, with a definitive sale agreement reached on February 20, 2024[327][330] - An annual impairment test resulted in a non-cash goodwill impairment charge of $8.9 million for the PeopleScout MSP reporting unit and a $0.6 million impairment for a trade name in the PeopleManagement segment[334][339] - The undiscounted workers' compensation reserve was $214.6 million as of December 31, 2023, compared to $270.5 million at the end of fiscal 2022[343] Controls and Procedures Management concluded that both disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified auditor's opinion - Management concluded that both disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023[390][392] - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[392][396] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information on directors, executive officers, corporate governance, compensation, and principal accountant fees is incorporated by reference from the 2024 proxy statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees is incorporated by reference from the company's definitive proxy statement for the 2024 Annual Meeting of Shareholders[407][408][409] Part IV Exhibits This section contains the financial statements and a comprehensive index of all exhibits filed with the Form 10-K - This section contains the financial statements and a comprehensive index of all exhibits filed with the Form 10-K[413][415]