TrueBlue(TBI) - 2021 Q4 - Annual Report

Part I Business TrueBlue provides specialized workforce solutions through PeopleReady, PeopleManagement, and PeopleScout, connecting 615,000 people with work and serving 95,000 clients in 2021 Business Overview TrueBlue operates three segments: PeopleReady, PeopleManagement, and PeopleScout, connecting 615,000 people to work and serving 95,000 clients in fiscal 2021 - In 2021, TrueBlue connected approximately 615,000 people with work and served about 95,000 clients across its three segments[15] Business Segment Overview | Segment | Service Offering | Key Metrics (Fiscal 2021) | | :--- | :--- | :--- | | PeopleReady | On-demand general, industrial, and skilled trade staffing. | - Connected ~220,000 people with work.
- Served ~94,000 clients.
- 619 branches in U.S., Canada, Puerto Rico. | | PeopleManagement | On-site industrial staffing (Staff Management | SMX, SIMOS) and commercial driver services (Centerline). | - Connected ~60,000 people with work. | | PeopleScout | Recruitment Process Outsourcing (RPO) and Managed Service Provider (MSP) solutions. | - Connected ~335,000 people with work. | Industry and Market Dynamics Operating in the large, fragmented, and cyclical staffing and growing HR outsourcing industries, the company benefits from demand for workforce flexibility and efficiency - Key market trends driving growth include the demand for workforce flexibility and scalability, the need for improved workforce productivity, and the increasing use of technology like AI and mobile apps to access talent[26] - The staffing industry is characterized by low barriers to entry, leading to increased competition during economic growth and consolidation during recessions. No single company holds a dominant market share[22] Business Strategy TrueBlue's strategy focuses on technology investments, including JobStack, Stafftrack, and Affinix platforms, to enhance client and candidate experiences and expand market presence - The company is focused on investing in technology to gain market share, accelerate revenue growth, and reduce service delivery costs[26] JobStack Platform Performance (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Shifts Dispatched via JobStack | ~3.4 million | ~2.9 million | | Digital Fill Rate | 58% | 53% | | Clients Using JobStack | >29,000 (+13% YoY) | N/A | | Heavy Client User Mix | 48% | 29% | - The PeopleScout segment utilizes its proprietary Affinix platform, which uses AI and machine learning to streamline sourcing and improve the candidate experience[31] Clients Serving diverse clients from small businesses to Fortune 100 companies, no single client accounted for over 10% of total revenue in fiscal 2021 Client Concentration | Client Group | % of Total Revenue (2021) | % of Total Revenue (2020) | % of Total Revenue (2019) | | :--- | :--- | :--- | :--- | | Ten Largest Clients | 17.2% | 19.0% | 16.5% | | Single Largest Client | 3.0% | N/A | N/A | - No single client represented more than 10.0% of total company revenue in fiscal 2021, 2020, or 2019[30] Human Capital Management TrueBlue employed 6,400 FTEs globally as of December 26, 2021, emphasizing strong culture, employee development, DE&I, and temporary associate safety Employee Demographics (as of Dec 26, 2021) | Metric | Value | | :--- | :--- | | Total FTE Employees | ~6,400 | | Global Female FTEs | ~66% | | Female Senior Management & Above | ~50% | | U.S. Ethnically Diverse FTEs | ~45% | | Board Diversity (Under-represented groups) | 67% | - The company achieved an all-time high employee engagement score of 78 in its October 2021 survey, an increase of 4 points from September 2020 and above the benchmark of 67[33] - In January 2021, a Vice President of Diversity, Equity and Inclusion was hired, reporting directly to the CEO, to strengthen DE&I commitments[39] Risk Factors The company faces diverse risks including operational, financial, legal, industry-specific, and cybersecurity challenges that could materially impact its business Risks Related to Company's Operations Operational risks include COVID-19 impacts, technological disruption, workers' compensation insurance, economic sensitivity, client concentration, and managing operational changes - The COVID-19 pandemic has negatively impacted operations and could continue to have a material adverse impact on the business[57] - Failure to invest in and adapt to new technologies (e.g., AI, mobile apps) could lead to a decline in business results as the industry evolves[59] - The business is dependent on obtaining workers' compensation insurance at commercially reasonable terms, and unexpected changes in claim trends could negatively impact financial condition[60] - Demand for workforce solutions is highly dependent on the state of the economy, creating volatility. A significant portion of revenue comes from large clients, exposing the company to concentration risk[65][67] Risks Related to Financial Position Financial risks include share repurchase program limitations, restrictive debt covenants, potential tax liabilities, and the effectiveness of internal financial controls - The share repurchase program does not obligate the company to repurchase a specific amount of stock and could diminish cash reserves[73] - The Revolving Credit Facility contains restrictive covenants (e.g., leverage ratio, fixed charge coverage ratio) that, if breached, could require early repayment of borrowings[74] - The company is subject to audits by various tax authorities, and the final determination of tax liabilities could be materially different from estimates[77] Legal and Compliance Related Risks Legal and compliance risks include employment-related claims, intellectual property infringement, and challenges in navigating complex, evolving regulations - As an employer, the company faces risks of liability for claims related to personal injury, wage and hour violations, discrimination, and harassment[79] - Failure to protect the company's intellectual property or infringing on the IP rights of others could harm the business and result in financial liability[81] Risks Related to Our Industry Industry risks include extensive government regulation, challenges in attracting qualified talent, and intense competition with low barriers to entry - The business is subject to extensive government regulation, and changes could materially harm earnings. For example, government-mandated wage increases could adversely affect results if not passed on to clients[83][84] - An inability to attract sufficient qualified associates and candidates, potentially impacted by government benefits or low unemployment, could prevent the company from meeting client needs[85] - The staffing industry is highly competitive with low barriers to entry, creating pressure on prices and margins[87] Risks Related to Cybersecurity, Data Privacy and Information Security Significant cybersecurity and data privacy risks include data breaches, increasing compliance costs from evolving regulations, and potential IT system failures - Cybersecurity incidents could lead to unauthorized disclosure of confidential information, resulting in penalties, litigation, and reputational damage[88][89] - Increasingly stringent data privacy laws and regulations (e.g., GDPR, CCPA) are increasing compliance costs and the risk of fines for non-compliance[90] - The business relies heavily on information technology systems, and failures or disruptions could lead to decreased revenue and increased overhead costs[92] Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[100] Properties The company owns its Tacoma headquarters and two Florida branches, leasing most other facilities, which are deemed suitable for operations - The company owns its corporate headquarters in Tacoma, WA and leases the vast majority of its other facilities[101] Legal Proceedings Information on legal proceedings is detailed in Note 8 of the consolidated financial statements - Information regarding legal proceedings is detailed in Note 8: Commitments and Contingencies[102] Mine Safety Disclosures This item is reported as not applicable - Not applicable[103] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities TrueBlue's common stock (TBI) trades on NYSE, has not paid dividends, and has a $50.0 million stock repurchase program remaining as of December 26, 2021 - The company's common stock is listed on the NYSE under the ticker TBI. No cash dividends have been declared to date[106][107] Stock Repurchases (Q4 2021) | Period | Total Shares Purchased | Weighted Average Price Paid | Amount Available for Repurchase (End of Period) | | :--- | :--- | :--- | :--- | | Q4 2021 Total | 627,225 | $26.89 | $50.0 million | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In fiscal 2021, TrueBlue achieved significant recovery with 17.7% revenue growth to $2.2 billion, improved gross margin to 25.8%, and net income of $61.6 million, maintaining strong liquidity and providing 2022 guidance Overview Fiscal 2021 saw TrueBlue's recovery with 17.7% revenue growth to $2.2 billion, expanded gross margin, $61.6 million net income, and strong liquidity Fiscal 2021 vs. 2020 Key Financials | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $2.2 billion (+17.7%) | $1.8 billion | | Gross Profit | $560.3 million | $440.6 million | | Gross Margin | 25.8% (+190 bps) | 23.9% | | Income (Loss) from Operations | $68.4 million | ($174.9) million | | Net Income (Loss) | $61.6 million | ($141.8) million | | Diluted EPS | $1.74 | ($4.01) | - The 2020 loss from operations was driven by a goodwill and intangible asset impairment charge of $175.2 million[125] - As of year-end 2021, the company had total liquidity of $343.7 million, consisting of $49.9 million in cash and $293.8 million available under its Revolving Credit Facility[127] Results of Operations Revenue grew 17.7% to $2.2 billion in 2021, with gross margin improving to 25.8%, leading to $68.4 million in income from operations Revenue from Services by Segment (Fiscal 2021 vs. 2020) | Segment | 2021 Revenue (in thousands) | 2020 Revenue (in thousands) | Growth % | | :--- | :--- | :--- | :--- | | PeopleReady | $1,270,928 | $1,099,462 | 15.6% | | PeopleManagement | $639,741 | $586,822 | 9.0% | | PeopleScout | $262,953 | $160,076 | 64.3% | | Total Company | $2,173,622 | $1,846,360 | 17.7% | - Gross profit margin expanded by 190 basis points to 25.8% in 2021, with staffing businesses contributing 90 bps (from lower workers' comp expense) and PeopleScout contributing 100 bps (from improved recruiter utilization)[136] - In 2020, the company recorded a goodwill and intangible asset impairment charge of $175.2 million, primarily impacting the PeopleManagement and PeopleScout segments[141] Segment Profit (Fiscal 2021 vs. 2020) | Segment | 2021 Segment Profit (in thousands) | 2021 Margin | 2020 Segment Profit (in thousands) | 2020 Margin | | :--- | :--- | :--- | :--- | :--- | | PeopleReady | $82,398 | 6.5% | $43,200 | 3.9% | | PeopleManagement | $13,196 | 2.1% | $11,717 | 2.0% | | PeopleScout | $36,163 | 13.8% | $4,525 | 2.8% | Future Outlook For fiscal 2022, the company anticipates disciplined cost management, continued technology investment, and provides guidance for SG&A, tax rate, and capital expenditures - For fiscal 2022, the company expects gross margin contraction of 10 to 70 basis points compared to 2021, primarily due to expected increases in workers' compensation expense[156] - Anticipated SG&A for Q1 2022 is between $118 million and $122 million. A project to redesign the PeopleReady technology platform is expected to cost approximately $10 million in fiscal 2022[156] - Expected capital expenditures for fiscal 2022 are between $43 million and $48 million, reflecting continued investment in technology like JobStack and Affinix[156] Liquidity and Capital Resources Liquidity decreased in 2021 due to lower operating cash flow, but the company maintains a strong capital position with an undrawn $300 million credit facility Cash Flow Summary (Fiscal 2021 vs. 2020) | Cash Flow Activity (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,440 | $152,531 | | Net cash used in investing activities | ($16,220) | ($34,411) | | Net cash used in financing activities | ($19,126) | ($92,502) | - The decrease in operating cash flow was primarily due to an $81.6 million use of cash for accounts receivable growth and a $57.1 million repayment of deferred employer payroll taxes from the CARES Act[158][160] - As of December 26, 2021, the company had no outstanding debt and $293.8 million available under its Revolving Credit Facility[127][332] Workers' Compensation Reserve Reconciliation (as of Dec 26, 2021) | Item (in thousands) | Amount | | :--- | :--- | | Total workers' compensation reserve | $256,194 | | Total collateral commitments | $208,194 | Summary of Critical Accounting Estimates Critical accounting estimates include workers' compensation reserve, allowance for credit losses, business combination valuations, goodwill impairment, and contingent legal liabilities - The workers' compensation reserve is a critical estimate based on actuarial analysis. For fiscal 2021 claims, a 5% change in key cost factors would change the workers' compensation cost by approximately $3 million[192][194] - Goodwill and indefinite-lived intangible assets are tested for impairment annually. The fair value of reporting units is estimated using a weighted average of income (discounted cash flow) and market approaches. The weighted average cost of capital used in the 2021 test ranged from 11.0% to 12.0%[202] - Based on the 2021 annual impairment test, all reporting units' fair values were substantially in excess (20% premium or greater) of their carrying values, and no impairment was recorded[205] Quantitative and Qualitative Disclosures About Market Risk The company faces market risk from interest rate fluctuations on its investment portfolio and credit facility, and minimal foreign currency risk - Primary market risks are related to changes in interest rates affecting the investment portfolio and revolving credit facility, and foreign currency exchange rate fluctuations[215] - The company is preparing for the discontinuation of LIBOR and has committed with its lenders to implement a successor reference rate[217] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for fiscal year 2021, including balance sheets, income statements, cash flows, and detailed notes Consolidated Financial Statements The consolidated financial statements present TrueBlue's financial position and performance, with 2021 total assets of $1.03 billion and total liabilities of $540.2 million Consolidated Balance Sheet Highlights (as of Dec 26, 2021) | Account (in thousands) | Amount | | :--- | :--- | | Total Current Assets | $445,073 | | Goodwill | $94,538 | | Total Assets | $1,033,226 | | Total Current Liabilities | $258,546 | | Total Liabilities | $540,159 | | Total Shareholders' Equity | $493,067 | Consolidated Statement of Operations Highlights (Fiscal Year 2021) | Account (in thousands) | Amount | | :--- | :--- | | Revenue from services | $2,173,622 | | Gross profit | $560,320 | | Income from operations | $68,442 | | Net income | $61,634 | Note 5: Goodwill and Intangible Assets As of December 26, 2021, net goodwill was $94.5 million and no impairment was recorded in fiscal 2021, unlike the $140.5 million goodwill impairment in 2020 Goodwill by Segment (in thousands) | Segment | Balance at Dec 27, 2020 | Balance at Dec 26, 2021 | | :--- | :--- | :--- | | PeopleReady | $60,094 | $60,094 | | PeopleManagement | $1,491 | $1,491 | | PeopleScout | $33,288 | $32,953 | | Total Company | $94,873 | $94,538 | - In fiscal 2020, a goodwill impairment charge of $140.5 million was recorded, with the PeopleManagement On-Site reporting unit's goodwill being fully impaired[322] - In fiscal 2020, a finite-lived intangible asset impairment charge of $34.7 million was recorded for client relationships in the PeopleScout RPO and PeopleManagement On-Site segments[323] Note 14: Segment Information The company reports three segments: PeopleReady ($1.27 billion revenue), PeopleManagement ($639.7 million), and PeopleScout ($263.0 million), with 92.8% of 2021 revenue from the U.S Segment Revenue and Profit (Fiscal 2021, in thousands) | Segment | Revenue from Services | Segment Profit | | :--- | :--- | :--- | | PeopleReady | $1,270,928 | $82,398 | | PeopleManagement | $639,741 | $13,196 | | PeopleScout | $262,953 | $36,163 | | Total | $2,173,622 | $131,757 | - The United States generated $2.02 billion, or 92.8%, of total company revenue in fiscal 2021[372] - In fiscal 2021, one client represented 10.9% of the PeopleScout segment's revenue. No single client represented 10.0% or more of the PeopleManagement segment's revenue[376] Controls and Procedures Management and external auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 26, 2021 - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 26, 2021[377] - Management concluded that internal control over financial reporting was effective as of December 26, 2021. This assessment was audited by Deloitte & Touche LLP, who also expressed an unqualified opinion[379][383] Part III Directors, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10-14, covering directors, executive compensation, and security ownership, is incorporated by reference from the 2022 proxy statement - Information for Part III (Items 10, 11, 12, 13, and 14) is incorporated by reference from the registrant's definitive proxy statement to be filed within 120 days of the fiscal year-end[394][395][396] Part IV Exhibits This section lists all exhibits filed with or incorporated by reference into the Form 10-K report - This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-K report[402][404] Form 10-K Summary The company reports no Form 10-K summary - None[408]