TrueBlue, Inc. — FY2019 Form 10-K Summary
Reporting period: Fiscal year ended December 29, 2019 (52 weeks). The filing also reports fourth-quarter results; fiscal Q4 ended December 29, 2019. TrueBlue provides workforce solutions through PeopleReady, PeopleManagement and PeopleScout.
Financial performance
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $2.369 billion | $2.499 billion |
| Gross profit / margin | $626.2 million / 26.4% | $665.6 million / 26.6% |
| Operating income / margin | $66.2 million / 2.8% | $73.9 million / 3.0% |
| Net income | $63.1 million | $65.8 million |
| Diluted EPS | $1.61 | $1.63 |
| Cash from operations | $93.5 million | $125.7 million |
- Revenue declined 5.2% and net income declined 4.1%. Gross margin narrowed 0.2 percentage points. SG&A fell $29 million to $522.4 million, principally from cost-control programs.
- By segment, PeopleReady revenue fell 3.2% to $1.474 billion; PeopleManagement fell 11.8% to $642.2 million; PeopleScout grew 1.4% to $252.5 million. Segment profit fell to $82.1 million, $12.6 million and $37.8 million, respectively. Segment profit is a non-GAAP measure as defined by the company.
- Q4 revenue was $591.0 million versus $650.1 million a year earlier; operating income was $7.3 million versus $16.9 million; net income was $8.7 million versus $14.9 million; and diluted EPS was $0.23 versus $0.37.
Liquidity, debt and capital
- Year-end cash and cash equivalents were $37.6 million. The company reported approximately $257 million available under its revolving facility and total liquidity of $295 million.
- Revolving-credit borrowings were $37.1 million, down from $80.0 million a year earlier. The $300 million facility matures in 2023; TrueBlue reported compliance with its covenants.
- Working capital was $190.9 million, compared with $204.3 million. Restricted cash and investments were $230.9 million, primarily supporting workers’ compensation obligations and other restricted purposes.
- Operating cash flow declined to $93.5 million. Capital expenditures were $28.1 million. The company repurchased $38.9 million of stock during the year and had $119 million remaining under repurchase authorizations. It has not declared cash dividends.
Changes, outlook and risks
- Management attributed weaker results to softer client demand and economic uncertainty, with manufacturing particularly pressured. PeopleManagement was also affected by the loss of Amazon’s Canadian business, reduced volume and pricing at a large retail client, and the 2018 PlaneTechs divestiture. PeopleScout’s growth included TMP, acquired in 2018, while client losses and lower recruiting volumes weighed on results.
- For FY2020, management expected further revenue pressure from weaker same-client demand across many industries and geographies, while noting recent improvement in PeopleReady demand. No specific numerical earnings or revenue guidance was provided. Management emphasized cost discipline and investment in digital platforms, including JobStack and Affinix.
- Effective December 30, 2019, Staff Management and SIMOS were combined into one operating segment, On-site, within PeopleManagement.
- Key risks include cyclical demand, clients reducing contingent labor, tight labor supply and wage inflation, inability to pass higher costs through to clients, workers’ compensation claims and collateral requirements, client concentration within segments, regulation and employment-related claims, cybersecurity and technology disruption, and debt-facility covenant and liquidity risks.
- SIMOS goodwill was a notable estimation sensitivity: its fair value exceeded carrying value by approximately 7% in an interim test, and the filing describes modest changes in discount rate, revenue growth or gross margin that could have produced impairment. No impairment was recorded for FY2019.
- Workers’ compensation reserves are significant and based on actuarial estimates; management cautioned that favorable reserve adjustments may diminish. A 5% change in one or more key claims factors was estimated to affect workers’ compensation cost by approximately $4 million.
- The effective tax rate was 10.0%, with Work Opportunity Tax Credits a significant factor. The filing says the credit was extended through December 31, 2020. The company reported no material expected impact from pending legal proceedings. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether client demand and revenue trends stabilized or worsened after year-end, particularly in industrial staffing and PeopleReady.
- PeopleManagement and PeopleScout client retention, volume recovery, pricing and segment margins.
- Workers’ compensation reserve development, insurance recoveries, collateral needs and the SIMOS goodwill impairment headroom.
- Actual FY2020 cash generation, capital spending, debt repayment and available liquidity, including the distinction between unrestricted cash and restricted collateral.
- The sustainability of tax-credit benefits and the company’s progress integrating the On-site segment and investing in JobStack and Affinix.