Business Wire | Feb 3, 2021 04:05PM EST

TrueBlue Reports Fourth Quarter and Full-Year 2020 Results

Feb. 03, 2021

TACOMA, Wash.--(BUSINESS WIRE)--Feb. 03, 2021--TrueBlue (NYSE:TBI) today announced its fourth quarter and full-year results for 2020.

Full-year revenue was $1.8 billion, a decrease of 22 percent compared to 2019. Net loss per diluted share was $4.01 compared to net income per diluted share of $1.61 in 2019. Adjusted net income1 per diluted share was $0.43 compared to adjusted net income per diluted share of $2.05 in 2019.

Fourth quarter revenue was $519 million, a decrease of 12 percent compared to revenue of $591 million in the fourth quarter of 2019. Net income per diluted share was $0.23 compared to net income per diluted share of $0.23 in the fourth quarter of 2019. Fourth quarter adjusted net income per diluted share was $0.33, a decrease of 15 percent compared to adjusted net income per diluted share of $0.39 in the fourth quarter of 2019.

"We saw steady improvement in our year-over-year revenue declines during the back half of the year, and we took the right actions to improve profitability, positioning the company for long-term growth as the economy continues to recover," said Patrick Beharelle, CEO of TrueBlue. "In addition to improving revenue trends, we sustained our cost discipline during the fourth quarter to drive growth of 25 percent in income from operations. I am extremely proud of the entire TrueBlue team for coming together and staying true to our mission of connecting people and work.

"We continue to invest in our digital strategies," Mr. Beharelle continued. "PeopleReady's JobStack app has been a critical tool for us during the pandemic, allowing us to connect with associates and clients safely during these tough times. Heavy users of the app demonstrated disproportionately higher revenue growth. Looking ahead, our technology investments have us well-positioned to gain market share during the recovery and beyond."

2021 Outlook

TrueBlue 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 fourth quarter and full-year 2020 results on a webcast at 2:30 p.m. PST (5:30 p.m. EST), today, Wednesday, Feb. 3, 2021. 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 2020, TrueBlue connected approximately 490,000 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.

1 See the financial statements accompanying the release and the company's 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 access sufficient capital to finance our operations, including our ability to comply with covenants contained in our revolving credit facility, (4) our ability to attract and retain clients, (5) our ability to attract sufficient qualified candidates and employees to meet the needs of our clients, (6) our ability to maintain profit margins, (7) new laws, regulations, and government incentives that could affect our operations or financial results, (8) our ability to successfully execute on business strategies to further digitize our business model, and (9) 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 52 weeks ended

(in thousands, except per Dec 27, Dec 29, Dec 27, 2020 Dec 29,share data) 2020 2019 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 103,626 132,475 408,307 516,220administrative expense

Depreciation and amortization 8,029 9,021 32,031 37,549

Goodwill and intangible asset - - 175,189 -impairment charge

Income (loss) from operations 9,142 7,339 (174,882 ) 66,179

Interest expense and other 1,943 2,014 1,620 3,865income, net

Income (loss) before tax 11,085 9,353 (173,262 ) 70,044expense (benefit)

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.

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.

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 (2,896 ) (7,667 )investments

Sales of restricted available-for-sale investments 12,311 20,859

Purchases of restricted held-to-maturity (32,495 ) (22,963 )investments

Maturities of restricted held-to-maturity 27,561 28,254 investments

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 (2,438 ) (2,222 )restricted stock

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 623 936 equivalents and restricted cash

Net change in cash, cash equivalents, and 26,241 (10,079 )restricted cash

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

Cash, cash equivalents and restricted cash, end of $ 118,612 $ 92,371 period

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

TRUEBLUE, INC.

SEGMENT DATA

(Unaudited)

13 weeks ended 52 weeks ended

(in thousands) Dec 27, Dec 29, Dec 27, 2020 Dec 29, 2019 2020 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 (4,608 ) (5,190 ) (20,714 ) (21,870 )expense

Total company 21,694 20,958 38,728 110,660 Adjusted EBITDA (2)

Work Opportunity TaxCredit processing (186 ) (240 ) (495 ) (960 )fees (3)

Acquisition/ - 50 - (1,562 )integration costs

Goodwill andintangible asset - - (175,189 ) - impairment charge

Gain on deferredcompensation assets (1,725 ) (495 ) (1,725 ) (495 )(4)

Workforce reduction 19 (2,829 ) (12,570 ) (3,301 )costs (5)

COVID-19 government (964 ) - 6,211 - subsidies (6)

Other adjustments, (1,667 ) (1,084 ) 2,189 (614 )net (7)

EBITDA (2) 17,171 16,360 (142,851 ) 103,728

Depreciation and (8,029 ) (9,021 ) (32,031 ) (37,549 )amortization

Interest expense and 1,943 2,014 1,620 3,865 other income, net

Income (loss) before 11,085 9,353 (173,262 ) 70,044 tax expense (benefit)

Income tax expense (3,059 ) (638 ) 31,421 (6,971 )(benefit)

Net income (loss) $ 8,026 $ 8,715 $ (141,841 ) $ 63,073

(1)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.

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

(3)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.

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

(5)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.

(6)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.

(7)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.

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.(1) 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(2) 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(3) workers from certain targeted groups with higher than average unemployment rates.



Gain realized on sale of deferred compensation mutual funds to purchase(4) 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(5) 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(6) 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(7) 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.

TRUEBLUE, INC.

NON-GAAP FINANCIAL MEASURES AND NON-GAAP RECONCILIATIONS



In addition to financial measures presented in accordance with U.S. GAAP, wemonitor certain non-GAAP key financial measures. The presentation of thesenon-GAAP financial measures is used to enhance the understanding of certainaspects of our financial performance. It is not meant to be considered inisolation, superior to, or as a substitute for the directly comparablefinancial measures prepared in accordance with U.S. GAAP, and may not becomparable to similarly titled measures of other companies.

Non-GAAP Measure Definition Purpose of Adjusted Measures

EBITDA excludes from net income (loss):

- interest expense and other income, net,

- income taxes, and

- depreciation and - Enhances comparability on a amortization. consistent basis and provides investors with useful insight into the underlying trends of the business. Adjusted EBITDA, further excludes:

- Work Opportunity Tax - Used by management toEBITDA and Adjusted Credit third-party assess performance andEBITDA processing fees, effectiveness of our business strategies. - acquisition/integration costs,

- goodwill and intangible - Provides a measure, among asset impairment charge, others, used in the determination of incentive - gain on deferred compensation for management. compensation assets,

- workforce reductions costs,

- COVID-19 government subsidies, and

- other adjustments, net.

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

- amortization of intangibles of acquired businesses,

- acquisition/integration costs, - Enhances comparability on a consistent basis and provides - workforce reduction investors with useful insightAdjusted net income costs, into the underlying trends of(loss) and Adjusted the business.net income (loss) - COVID-19 governmentper diluted share subsidies - Used by management to assess performance and - other adjustments, net, effectiveness of our business strategies. - 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.

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

RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME AND1. ADJUSTED NET INCOME PER DILUTED SHARE (Unaudited)

Q4 2020 Q4 2019 2020 2019

13 weeks ended 52 weeks ended

(in thousands, except Dec 27, Dec 29, Dec 27, 2020 Dec 29, for per share data) 2020 2019 2019

Net income (loss) $ 8,026 $ 8,715 $ (141,841 ) $ 63,073

Amortization of intangible assets of 2,028 4,003 10,144 17,899 acquired businesses

Acquisition/ - (50 ) - 1,562 integration costs

Goodwill and intangible asset - - 175,189 - impairment charge

Workforce reduction (19 ) 2,829 12,570 3,301 costs (1)

COVID-19 government 964 - (6,211 ) - subsidies, net (2)

Other adjustments, net 1,667 1,084 (2,189 ) 614 (3)

Tax effect of adjustments to net (1,280 ) (1,102 ) (28,729 ) (3,273 ) income (loss) (4)

Adjustment of income taxes to normalized - (671 ) (3,719 ) (2,835 ) effective rate (5)

Adjusted net income $ 11,386 $ 14,808 $ 15,214 $ 80,341



Adjusted net income $ 0.33 $ 0.39 $ 0.43 $ 2.05 per diluted share



Diluted weighted average shares 34,954 38,348 35,658 39,179 outstanding

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

RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED2. EBITDA (Unaudited)

Q4 2020 Q4 2019 2020 2019

13 weeks ended 52 weeks ended

(in thousands) Dec 27, Dec 29, Dec 27, 2020 Dec 29, 2020 2019 2019

Net income (loss) $ 8,026 $ 8,715 $ (141,841 ) $ 63,073

Income tax expense 3,059 638 (31,421 ) 6,971 (benefit)

Interest expense and (1,943 ) (2,014 ) (1,620 ) (3,865 ) other (income), net

Depreciation and 8,029 9,021 32,031 37,549 amortization

EBITDA 17,171 16,360 (142,851 ) 103,728

Work Opportunity Tax Credit processing 186 240 495 960 fees (6)

Acquisition/ - (50 ) - 1,562 integration costs

Goodwill and intangible asset - - 175,189 - impairment charge

Gain on deferred compensation assets 1,725 495 1,725 495 (7)

Workforce reduction (19 ) 2,829 12,570 3,301 costs (1)

COVID-19 government 964 - (6,211 ) - subsidies, net (2)

Other adjustments, 1,667 1,084 (2,189 ) 614 net (3)

Adjusted EBITDA $ 21,694 $ 20,958 $ 38,728 $ 110,660

(1)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.

(2)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.

(3)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.

(4)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.

(5)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.

(6)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.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210203005140/en/

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