TrueBlue, Inc. — Q2 2021 Form 10-Q
Reporting period: Thirteen and twenty-six weeks ended June 27, 2021. TrueBlue provides workforce solutions through PeopleReady (on-demand staffing), PeopleManagement (on-site industrial staffing and commercial drivers), and PeopleScout (recruitment process outsourcing and managed services). Amounts below are in U.S. dollars.
Financial results
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $516.0 million | $358.9 million | $974.7 million | $853.2 million |
| Gross profit / margin | $136.5 million / 26.4% | $83.2 million / 23.2% | $247.0 million / 25.3% | $209.4 million / 24.5% |
| Income (loss) from operations | $18.9 million | $(21.2) million | $25.2 million | $(196.7) million |
| Net income (loss) | $15.9 million | $(8.2) million | $22.8 million | $(158.7) million |
| Diluted EPS | $0.45 | $(0.23) | $0.65 | $(4.39) |
| Operating cash flow | Not separately provided for the quarter | $47.4 million | $103.5 million |
- Q2 revenue rose 43.7% year over year as demand recovered; first-half revenue rose 14.2%. Q2 growth was 43.1% at PeopleReady, 28.4% at PeopleManagement, and 106.5% at PeopleScout.
- Q2 gross margin increased 320 basis points. Management attributed the improvement to higher PeopleScout volumes and operating leverage, prior-year workforce-reduction costs, and lower workers’ compensation expense, including favorable prior-year claim development.
- Q2 SG&A was $110.5 million, or 21.4% of revenue, versus $97.2 million, or 27.1%. First-half SG&A declined to $207.9 million from $214.6 million.
- First-half 2020 results included a $175.2 million non-cash goodwill and intangible-asset impairment charge. No impairment was recorded in the first half of 2021; management said all reporting units’ fair values exceeded carrying values by at least 20%.
- First-half operating cash flow fell year over year, in part because receivables used $16.5 million of cash in 2021 versus providing $111.8 million in 2020. The prior-year cash benefit reflected declining revenue and lower receivables during the pandemic downturn.
Balance sheet, debt, and liquidity
- At June 27, 2021, cash and cash equivalents were $105.2 million; restricted cash and investments were $224.6 million. Total assets were $1.018 billion and total liabilities were $552.8 million.
- The company had no revolver borrowings. The $300 million revolving facility matures March 16, 2025. Although $294 million was unused, availability under the most restrictive covenant was approximately $170 million; together with cash, management cited total liquidity of approximately $274.8 million. A separate temporary-covenant liquidity measure was $399.1 million. These measures use different covenant definitions.
- Workers’ compensation reserves totaled $254.9 million, net of discount, and collateral commitments were $211.8 million. Much of the restricted balance supports these obligations and is not ordinary operating liquidity.
- Operating cash flow was $47.4 million; capital expenditures were $19.9 million. Cash, cash equivalents, and restricted cash increased by $41.1 million during the first half.
Outlook, commentary, and risks
- For Q3 2021, management expected sequential revenue growth of 9%–11% and year-over-year gross-margin expansion of 250–290 basis points. For full-year 2021, it expected gross-margin expansion of 100–160 basis points, SG&A of $452–$460 million, an effective tax rate of 12%–16%, and capital expenditures of $40–$44 million.
- Management expected to repay approximately $60 million of deferred employer payroll taxes in Q3 2021; the filing says the deferred amount was expected to be paid by September 15, 2021. It also anticipated approximately $14 million of Q3 capital expenditures, including Chicago support-center work.
- Management reported worker-supply constraints, particularly in PeopleReady, and said government stimulus and enhanced unemployment benefits were contributing factors. COVID-19, uneven recovery, client demand, and worker availability continued to limit forecasting visibility.
- Other key risks include recruiting and retaining qualified workers, workers’ compensation claim variability and collateral requirements, economic and industry concentration, technology and cybersecurity risks, and compliance with changing employment and privacy regulations. Ordinary-course legal proceedings were described as immaterial, with no expected material effect.
- Management stated that cash flows and capital resources should be adequate for the next 12 months. It also described technology investments and pilot projects intended to improve digital service delivery and branch efficiency.
Important facts for investors to verify
- Whether worker availability and client demand supported the guided Q3 sequential growth and margin expansion.
- Actual timing and cash impact of the deferred payroll-tax repayment and Chicago support-center spending.
- Whether favorable workers’ compensation reserve adjustments continue to diminish as management expects, and whether collateral requirements change.
- Revolver availability under the applicable covenants and the distinction between covenant-based liquidity measures and cash available for operations.
- Cash conversion and receivables collection as revenue recovers; first-half operating cash flow was materially below the prior-year comparison.