Business Wire | Jul 27, 2020 04:06PM EDT

TrueBlue Reports Second Quarter 2020 Results

Jul. 27, 2020

TACOMA, Wash.--(BUSINESS WIRE)--Jul. 27, 2020--TrueBlue (NYSE:TBI) today announced its second quarter results for 2020.

Second quarter revenue was $359 million, a decrease of 39 percent compared to revenue of $589 million in the second quarter of 2019. Net loss per diluted share was $0.23 compared to net income per diluted share of $0.49 in the second quarter of 2019. Adjusted net loss1 per diluted share was $0.12 compared to adjusted net income per diluted share of $0.64 in the second quarter of 2019.

"I want to thank our employees, associates, and clients for their outstanding efforts to safely serve the needs of our communities and essential businesses over the past several months," said Patrick Beharelle, CEO of TrueBlue. "We will continue to face revenue challenges until the economic recovery from COVID-19 gains greater momentum and clients are back on their feet."

"We experienced a significant decline in the demand for our services during the quarter," Mr. Beharelle continued. "We saw moderate demand improvement toward the end of the quarter which continued into July. Our actions to reduce expenses while maintaining our operational strengths are paying off. These actions not only help preserve profitability, but also help maintain our balance sheet strength and allow us to continue to invest in our digital strategies."

2020 Outlook

Due to the uncertainty surrounding COVID-19 and its impact on the business environment, TrueBlue is not providing customary quarterly guidance. However, the company is providing certain forward-looking information to help investors form their own estimates, which can be found in the quarterly earnings presentation filed today.

Management will discuss second quarter 2020 results on a webcast at 2 p.m. PDT (5 p.m. EDT), today, Monday, Jul. 27, 2020. The webcast can be accessed on TrueBlue's website: www.trueblue.com.

About TrueBlue

TrueBlue (NYSE: TBI) is a leading provider of specialized workforce solutions that help clients achieve business growth and improve productivity. In 2019, TrueBlue connected approximately 724,000 people with work. Its PeopleReady segment offers on-demand, industrial staffing, PeopleManagement offers contingent, on-site industrial staffing and commercial driver services, and PeopleScout offers recruitment process outsourcing (RPO) and managed service provider (MSP) solutions to a wide variety of industries. Learn more at www.trueblue.com.

^ See the financial statements accompanying the release and the company's(1) website for more information on non-GAAP terms.

Forward-looking statements

This document contains forward-looking statements relating to our plans and expectations, all of which are subject to risks and uncertainties. Such statements are based on management's expectations and assumptions as of the date of this release and involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in our forward-looking statements including: (1) national and global economic conditions, (2) the continued impact of COVID-19 and related economic impact and governmental response, (3) our ability to successfully reduce operating expenses and otherwise adapt to the changing economic environment caused by COVID-19, (4) our ability to access sufficient capital to finance our operations, including our ability to comply with or obtain waivers for covenants contained in our revolving credit facility, (5) our ability to attract and retain clients, (6) our ability to attract sufficient qualified candidates and employees to meet the needs of our clients, (7) our ability to maintain profit margins, (8) new laws and regulations that could affect our operations or financial results, (9) our ability to successfully execute on business strategies to further digitize our business model, and (10) any reduction or change in tax credits we utilize, including the Work Opportunity Tax Credit. Other information regarding factors that could affect our results is included in our Securities Exchange Commission (SEC) filings, including the company's most recent reports on Forms 10-K and 10-Q, copies of which may be obtained by visiting our website at www.trueblue.com under the Investor Relations section or the SEC's website at www.sec.gov. We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Any other references to future financial estimates are included for informational purposes only and subject to risk factors discussed in our most recent filings with the SEC.

In addition, we use several non-GAAP financial measures when presenting our financial results in this document. Please refer to the reconciliations between our GAAP and non-GAAP financial measures in the appendix to this document and on our website at www.trueblue.com under the Investor Relations section for additional information on both current and historical periods. 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.

TRUEBLUE, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

13 Weeks Ended 26 Weeks Ended

(in thousands, except Jun 28, Jun 30, Jun 28, 2020 Jun 30, 2019per share data) 2020 2019

Revenue from services $ 358,944 $ 588,594 $ 853,196 $ 1,140,946

Cost of services 275,719 431,911 643,812 837,568

Gross profit 83,225 156,683 209,384 303,378

Selling, general and 97,200 125,965 214,581 253,945 administrative expense

Depreciation and 7,256 9,827 16,350 19,779 amortization

Goodwill andintangible asset - - 175,189 - impairment charge

Income (loss) from (21,231 ) 20,891 (196,736 ) 29,654 operations

Interest and other (412 ) 827 (149 ) 1,380 income (expense), net

Income (loss) before (21,643 ) 21,718 (196,885 ) 31,034 tax expense (benefit)

Income tax expense (13,475 ) 2,312 (38,223 ) 3,352 (benefit)

Net income (loss) $ (8,168 ) $ 19,406 $ (158,662 ) $ 27,682



Net income (loss) per common share:

Basic $ (0.23 ) $ 0.50 $ (4.39 ) $ 0.71

Diluted $ (0.23 ) $ 0.49 $ (4.39 ) $ 0.70



Weighted average shares outstanding:

Basic 35,077 39,163 36,166 39,264

Diluted 35,077 39,554 36,166 39,619

TRUEBLUE, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands) Jun 28, 2020 Dec 29, 2019

ASSETS

Cash and cash equivalents $ 92,051 $ 37,608

Accounts receivable, net 224,078 342,303

Other current assets 43,772 41,822

Total current assets 359,901 421,733

Property and equipment, net 67,447 66,150

Restricted cash and investments 217,844 230,932

Goodwill and intangible assets, net 126,617 311,171

Other assets, net 131,192 106,169

Total assets $ 903,001 $ 1,136,155



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities $ 220,025 $ 230,806

Long-term debt, less current portion 17,949 37,100

Other long-term liabilities 252,266 242,276

Total liabilities 490,240 510,182

Shareholders' equity 412,761 625,973

Total liabilities and shareholders' equity $ 903,001 $ 1,136,155

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

26 Weeks Ended

(in thousands) Jun 28, 2020 Jun 30, 2019

Cash flows from operating activities:

Net income (loss) $ (158,662 ) $ 27,682

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

Depreciation and amortization 16,350 19,779

Goodwill and intangible asset impairment charge 175,189 -

Provision for doubtful accounts 5,923 3,761

Stock-based compensation 4,345 5,260

Deferred income taxes (27,049 ) 2,393

Non-cash lease expense 7,454 6,934

Other operating activities 2,669 (2,072 )

Changes in operating assets and liabilities:

Accounts receivable 111,803 16,162

Income tax receivable (7,291 ) (6,347 )

Other assets 4,682 (4,472 )

Accounts payable and other accrued expenses (22,197 ) (16,542 )

Accrued wages and benefits 4,921 (4,667 )

Workers' compensation claims reserve (5,668 ) (7,109 )

Operating lease liabilities (7,643 ) (6,957 )

Other liabilities (1,344 ) 3,174

Net cash provided by operating activities 103,482 36,979

Cash flows from investing activities:

Capital expenditures (11,641 ) (11,064 )

Purchases of restricted available-for-sale (1,739 ) (4,295 )investments

Sales of restricted available-for-sale investments 2,581 2,435

Purchases of restricted held-to-maturity investments (11,458 ) (7,020 )

Maturities of restricted held-to-maturity investments 16,190 17,250

Net cash used in investing activities (6,067 ) (2,694 )

Cash flows from financing activities:

Purchases and retirement of common stock (52,346 ) (9,077 )

Net proceeds from employee stock purchase plans 536 700

Common stock repurchases for taxes upon vesting of (1,956 ) (1,631 )restricted stock

Net change in Revolving Credit Facility 7,900 (55,300 )

Other (1,344 ) (119 )

Net cash used in financing activities (47,210 ) (65,427 )

Effect of exchange rate changes on cash, cash (736 ) 560 equivalents and restricted cash

Net change in cash, cash equivalents, and restricted 49,469 (30,582 )cash

Cash, cash equivalents and restricted cash, beginning 92,371 102,450 of period

Cash, cash equivalents and restricted cash, end of $ 141,840 $ 71,868 period

TRUEBLUE, INC.

SEGMENT DATA

(Unaudited)

13 Weeks Ended

(in thousands) Jun 28, 2020 Jun 30, 2019

Revenue from services:

PeopleReady $ 209,151 $ 369,261

PeopleManagement 118,661 153,530

PeopleScout 31,132 65,803

Total company $ 358,944 $ 588,594



Segment profit (loss) (1):

PeopleReady $ 633 $ 21,795

PeopleManagement 1,803 4,128

PeopleScout (2,782 ) 11,223

Total segment profit (loss) (346 ) 37,146

Corporate unallocated expense (4,929 ) (3,634 )

Total company Adjusted EBITDA (2) (5,275 ) 33,512

Work Opportunity Tax Credit processing fees (3) - (240 )

Acquisition/integration costs (4) - (673 )

Other adjustments (5) (8,700 ) (1,881 )

EBITDA (2) (13,975 ) 30,718

Depreciation and amortization (7,256 ) (9,827 )

Interest and other income (expense), net (412 ) 827

Income (loss) before tax expense (benefit) (21,643 ) 21,718

Income tax benefit (expense) 13,475 (2,312 )

Net income (loss) $ (8,168 ) $ 19,406

We evaluate performance based on segment revenue and segment profit. Segment profit (loss) includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable(1) segment. Segment profit (loss) excludes depreciation and amortization expense, unallocated corporate general and administrative expense, interest, other income and expense, income taxes, and other adjustments not considered to be ongoing.



(2) 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(3) Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.



(4) Acquisition/integration costs relate to the acquisition of TMP Holdings LTD completed on June 12, 2018.



Other adjustments for the 13 weeks ended June 28, 2020 and June 30, 2019 primarily include workforce reduction costs of $11.0 million ($3.0 million in cost of services and $8.0 million in selling, general and administrative expense) and $0.5 million (in selling, general and(5) administrative expense), respectively, implementation costs for cloud-based systems of $0.1 million and $1.1 million, respectively and amortization of software as a service assets of $0.6 million and $0.5 million, respectively, which is reported in selling, general and administrative expense. For the 13 weeks ended June 28, 2020, these costs were slightly offset by $3.1 million in COVID-19 government subsidies.

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 excludes from net income (loss):

- interest and other - Enhances comparability on a income (expense), net, consistent basis and provides investors with useful insight - income taxes, and into the underlying trends of the business. - depreciation and amortization.

EBITDA and Adjusted - Used by management to assessEBITDA performance and effectiveness Adjusted EBITDA, further of our business strategies. excludes: - Work Opportunity Tax Credit third-party - Provides a measure, among processing fees, others, used in the determination of incentive - acquisition/integration compensation for management. costs,

- other adjustments.

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

- amortization of - Enhances comparability on a intangibles of acquired consistent basis and provides businesses, investors with useful insight into the underlying trends of - acquisition/integration the business.Adjusted net income costs,(loss) and Adjusted net income (loss) - other adjustments,per diluted share - Used by management to assess - tax effect of each performance and effectiveness adjustment to U.S. GAAP of our business strategies. net income (loss), and - adjustment of income taxes to our normalized long-term expected tax rate for periods prior to Q2 2020.

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

(Unaudited)

13 Weeks Ended

(in thousands, except for per share data) Jun 28, Jun 30, 2020 2019

Net income (loss) $ (8,168 ) $ 19,406

Amortization of intangible assets of acquired businesses 2,071 4,957 (1)

Acquisition/integration costs (2) - 673

Other adjustments (3) 8,700 1,881

Tax effect of adjustments to net income (loss) (4) (6,706 ) (1,052 )

Adjustment of income taxes to normalized effective rate - (729 )(5)

Adjusted net income (loss) $ (4,103 ) $ 25,136



Adjusted net income (loss) per diluted share $ (0.12 ) $ 0.64



Diluted weighted average shares outstanding 35,077 39,554

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

(Unaudited)

13 Weeks Ended

(in thousands) Jun 28, 2020 Jun 30, 2019

Net income (loss) $ (8,168 ) $ 19,406

Income tax expense (benefit) (13,475 ) 2,312

Interest and other (income) expense, net 412 (827 )

Depreciation and amortization 7,256 9,827

EBITDA (13,975 ) 30,718

Work Opportunity Tax Credit processing fees (6) - 240

Acquisition/integration costs (2) - 673

Other adjustments (3) 8,700 1,881

Adjusted EBITDA $ (5,275 ) $ 33,512

(1) Amortization of intangible assets of acquired businesses.



(2) Acquisition/integration costs for the acquisition of TMP Holding LTD completed on June 12, 2018.



Other adjustments for the 13 weeks ended June 28, 2020 and June 30, 2019 primarily include workforce reduction costs of $11.0 million ($3.0 million in cost of services and $8.0 million in selling, general and administrative expense) and $0.5 million (in selling, general and(3) administrative expense), respectively, implementation costs for cloud-based systems of $0.1 million and $1.1 million, respectively and amortization of software as a service assets of $0.6 million and $0.5 million, respectively, which is reported in selling, general and administrative expense. For the 13 weeks ended June 28, 2020, these costs were slightly offset by $3.1 million in COVID-19 government subsidies.



Total tax effect of each of the adjustments to U.S. GAAP net income(4) (loss) using the effective rate of 62 percent for Q2 2020 relative to the expected long-term ongoing rate of 14 percent for Q2 2019.



Adjustment of the effective income tax rate to the expected long-term(5) ongoing rate of 14 percent for Q2 2019. Beginning in Q2 2020, we will not be adjusting our GAAP tax rate in our adjusted net income calculation until our profitability rises to a more substantial level.



These third-party processing fees are associated with generating the Work(6) Opportunity Tax Credits, which are designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

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CONTACT: Derrek Gafford, Executive Vice President and CFO 253-680-8214