TrueBlue Reports Third Quarter 2019 Results

10/28/2019

TACOMA, Wash.--(BUSINESS WIRE)-- TrueBlue (NYSE:TBI) today announced its third quarter results for 2019.

Third quarter revenue was $637 million, a decrease of 6 percent, compared to revenue of $680 million in the third quarter of 2018. Net income per diluted share was $0.68, an increase of 11 percent, compared to $0.61 in the third quarter of 2018. Adjusted net income1 per diluted share was $0.76, a decrease of 4 percent, compared to $0.79 in the third quarter of 2018.

“Strong execution drove better than expected top-line and bottom-line results this quarter,” said Patrick Beharelle, CEO of TrueBlue. “Despite ongoing economic uncertainty, monthly revenue trends were consistent during the quarter and we delivered another quarter of net income per diluted share growth.

“TrueBlue has been driving digital disruption within the staffing industry with our JobStack™ and Affinix™ offerings and we continue to experience favorable employee and customer adoption,” Mr. Beharelle continued. “We remain squarely focused on client expansion and retention, disciplined cost management and investing in our digital strategies to differentiate our service offerings.”

The company also announced that its Board of Directors authorized an additional $100 million of share repurchases. “Our balance sheet is in great shape and the business is producing strong cash flow,” said Derrek Gafford, CFO of TrueBlue. “This authorization reflects our confidence in the long-term outlook for our business and our desire to continue to return capital to shareholders.”

2019 Outlook

TrueBlue estimates revenue for the fourth quarter of 2019 will range from $587 million to $612 million. The company also estimates net income per diluted share will range from $0.18 to $0.28 and adjusted net income per diluted share will range from $0.35 to $0.45.

Management will discuss third quarter 2019 results on a webcast at 2 p.m. PDT (5 p.m. EDT), today, Monday, Oct. 28, 2019. 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 2018, TrueBlue connected approximately 730,000 people with work. Its PeopleReady segment offers industrial staffing services, PeopleManagement offers contingent and productivity-based on-site industrial staffing and driver staffing 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) our ability to attract and retain clients, (3) our ability to attract sufficient qualified candidates and employees to meet the needs of our clients, (4) our ability to maintain profit margins, (5) new laws and regulations that could affect our operations or financial results, (6) our ability to successfully complete and integrate acquisitions, (7) our ability to successfully execute on business strategies to further digitize our business model, and (8) 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 reference 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

 

39 Weeks Ended

(in thousands, except per share data)

Sep 29, 2019

Sep 30, 2018

 

Sep 29, 2019

Sep 30, 2018

Revenue from services

$

636,793

 

$

680,371

 

 

$

1,777,739

 

$

1,849,060

 

Cost of services

467,671

 

496,053

 

 

1,301,924

 

1,355,890

 

Gross profit

169,122

 

184,318

 

 

475,815

 

493,170

 

Selling, general and administrative expense

131,187

 

145,382

 

 

388,447

 

405,352

 

Depreciation and amortization

8,749

 

10,586

 

 

28,528

 

30,777

 

Income from operations

29,186

 

28,350

 

 

58,840

 

57,041

 

Interest and other income (expense), net

471

 

(340

)

 

1,851

 

896

 

Income before tax expense

29,657

 

28,010

 

 

60,691

 

57,937

 

Income tax expense

2,981

 

3,630

 

 

6,333

 

7,070

 

Net income

$

26,676

 

$

24,380

 

 

$

54,358

 

$

50,867

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic

$

0.69

 

$

0.61

 

 

$

1.39

 

$

1.27

 

Diluted

$

0.68

 

$

0.61

 

 

$

1.38

 

$

1.26

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

38,741

 

39,743

 

 

39,090

 

40,138

 

Diluted

39,213

 

40,073

39,479

40,417

 

TRUEBLUE, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(in thousands)

Sep 29, 2019

Dec 30, 2018

ASSETS

 

 

Cash and cash equivalents

$

23,557

 

$

46,988

 

Accounts receivable, net

367,038

 

355,373

 

Other current assets

35,395

 

27,466

 

Total current assets

425,990

 

429,827

 

Property and equipment, net

61,218

 

57,671

 

Restricted cash and investments

227,043

 

235,443

 

Goodwill and intangible assets, net

312,984

 

328,695

 

Operating lease right-of-use assets

36,794

 

 

Other assets, net

67,016

 

63,208

 

Total assets

$

1,131,045

 

$

1,114,844

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities

$

226,479

 

$

225,526

 

Long-term debt

43,800

 

80,000

 

Operating lease long-term liabilities

24,896

 

 

Other long-term liabilities

215,205

 

217,879

 

Total liabilities

510,380

 

523,405

 

Shareholders’ equity

620,665

 

591,439

 

Total liabilities and shareholders’ equity

$

1,131,045

 

$

1,114,844

 

TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

39 Weeks Ended

(in thousands)

Sep 29, 2019

Sep 30, 2018

Cash flows from operating activities:

 

 

Net income

$

54,358

 

$

50,867

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

28,528

 

30,777

 

Provision for doubtful accounts

5,997

 

10,140

 

Stock-based compensation

8,119

 

9,552

 

Deferred income taxes

1,058

 

2,638

 

Non-cash lease expense

11,087

 

 

Other operating activities

(1,701

)

526

 

Changes in operating assets and liabilities:

 

 

Accounts receivable

(17,616

)

(17,960

)

Income tax receivable

(3,982

)

(5,389

)

Other assets

(9,449

)

(12,110

)

Accounts payable and other accrued expenses

(6,970

)

3,179

 

Accrued wages and benefits

(141

)

4,549

 

Workers’ compensation claims reserve

(7,176

)

(8,405

)

Operating lease liabilities

(11,297

)

 

Other liabilities

1,723

 

262

 

Net cash provided by operating activities

52,538

 

68,626

 

Cash flows from investing activities:

 

 

Capital expenditures

(18,297

)

(10,313

)

Acquisition of business

 

(22,742

)

Divestiture of business

215

 

10,414

 

Purchases of restricted investments

(22,597

)

(11,747

)

Maturities of restricted investments

28,976

 

17,021

 

Net cash used in investing activities

(11,703

)

(17,367

)

Cash flows from financing activities:

 

 

Purchases and retirement of common stock

(31,316

)

(24,818

)

Net proceeds from employee stock purchase plans

1,023

 

1,146

 

Common stock repurchases for taxes upon vesting of restricted stock

(1,934

)

(2,539

)

Net change in revolving credit facility

(36,200

)

12,000

 

Payments on debt

 

(22,855

)

Other

(203

)

 

Net cash used in financing activities

(68,630

)

(37,066

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

732

 

(583

)

Net change in cash, cash equivalents, and restricted cash

(27,063

)

13,610

 

Cash, cash equivalents and restricted cash, beginning of period

102,450

 

73,831

 

Cash, cash equivalents and restricted cash, end of period

$

75,387

 

$

87,441

 

TRUEBLUE, INC.

SEGMENT DATA

(Unaudited)

 

 

13 Weeks Ended

(in thousands)

Sep 29, 2019

 

Sep 30, 2018

Revenue from services:

 

 

 

PeopleReady

$

413,132

 

 

$

428,665

 

PeopleManagement

159,315

 

 

181,199

 

PeopleScout

64,346

 

 

70,507

 

Total company

$

636,793

 

 

$

680,371

 

 

 

 

 

Segment profit (1):

 

 

 

PeopleReady

$

30,878

 

 

$

31,230

 

PeopleManagement

3,381

 

 

6,169

 

PeopleScout

10,774

 

 

12,478

 

 

45,033

 

 

49,877

 

Corporate unallocated expense

(5,769

)

 

(6,469

)

Total company Adjusted EBITDA (2)

39,264

 

 

43,408

 

Work Opportunity Tax Credit processing fees (3)

(240

)

 

(241

)

Acquisition/integration costs (4)

(362

)

 

(1,226

)

Other adjustments (5)

(727

)

 

(3,005

)

EBITDA (2)

37,935

 

 

38,936

 

Depreciation and amortization

(8,749

)

 

(10,586

)

Interest and other income (expense), net

471

 

 

(340

)

Income before tax expense

29,657

 

 

28,010

 

Income tax expense

(2,981

)

 

(3,630

)

Net income

$

26,676

 

 

$

24,380

 

(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 goodwill and intangible impairment charges, 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.

(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)

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

(5)

Other adjustments for the 13 weeks ended September 29, 2019 primarily include implementation costs for cloud-based systems of $0.4 million and amortization of software as a service assets of $0.4 million, which is reported in selling, general and administrative expense. Other adjustments for the 13 weeks ended September 30, 2018 include implementation costs for cloud-based systems of $1.5 million and accelerated vesting of stock associated with the CEO transition of $1.5 million.

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:
- interest and other income (expense), net,
- income taxes, and
- depreciation and amortization.

Adjusted EBITDA, further excludes:
- Work Opportunity Tax Credit third-party processing fees,
- acquisition/integration costs and
- other adjustments.

 

- 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 and
Adjusted net income, per
diluted share

Net income and net income per diluted share, excluding:
- amortization of intangibles of acquired businesses,
- acquisition/integration costs,
- gain on divestiture,
- other adjustments,
- tax effect of each adjustment to U.S. GAAP net income, and
- adjust income taxes to the expected effective tax rate.

 

- 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.

Organic revenue

Organic revenue excludes the first 12 months of operations of acquired businesses.

 

- 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.

Free cash flow

Net cash provided by operating activities, minus cash purchases for property and equipment.

 

- Used by management to assess cash flows.

1.

RECONCILIATION OF U.S. GAAP NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME, PER DILUTED SHARE

(Unaudited)

 

 

Q3 2019

 

Q3 2018

 

Q4 2019 Outlook

 

13 Weeks Ended

 

13 Weeks Ended

 

13 Weeks Ended

(in thousands, except for per share data)

Sep 29, 2019

 

Sep 30, 2018

 

Dec 29, 2019

Net income

$

26,676

 

 

$

24,380

 

 

$

7,000

 

$

10,900

 

Gain on divestiture (1)

 

 

385

 

 

Amortization of intangible assets of acquired businesses (2)

3,858

 

 

5,193

 

 

4,000

Acquisition/integration costs (3)

362

 

 

1,226

 

 

400

Other adjustments (4)

727

 

 

3,005

 

 

3,200

Tax effect of adjustments to net income (5)

(692

)

 

(1,569

)

 

(1,100)

Adjustment of income taxes to normalized effective rate (6)

(1,171

)

 

(852

)

 

Adjusted net income

$

29,760

 

 

$

31,768

 

 

$

13,500

 

$

17,400

 

 

 

 

 

 

 

 

 

Adjusted net income, per diluted share

$

0.76

 

 

$

0.79

 

 

$

0.35

 

$

0.45

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

39,213

 

 

40,073

 

 

38,400

2.

RECONCILIATION OF U.S. GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA

(Unaudited)

 

 

Q3 2019

 

Q3 2018

 

Q4 2019 Outlook*

 

13 Weeks Ended

 

13 Weeks Ended

 

13 Weeks Ended

(in thousands)

Sep 29, 2019

 

Sep 30, 2018

 

Dec 29, 2019

Net income

$

26,676

 

 

$

24,380

 

 

$

7,000

 

$

10,900

 

Income tax expense

2,981

 

 

3,630

 

 

1,100

 

1,800

 

Interest and other (income) expense, net

(471

)

 

340

 

 

(1,600)

Depreciation and amortization

8,749

 

 

10,586

 

 

8,900

EBITDA

37,935

 

 

38,936

 

 

15,400

 

19,900

 

Work Opportunity Tax Credit processing fees (7)

240

 

 

241

 

 

200

Acquisition/integration costs (3)

362

 

 

1,226

 

 

400

Other adjustments (4)

727

 

 

3,005

 

 

3,200

Adjusted EBITDA

$

39,264

 

 

$

43,408

 

 

$

19,200

 

$

23,700

 

* Totals may not sum due to rounding

3.

RECONCILIATION OF U.S. GAAP REVENUE TO ORGANIC REVENUE

(Unaudited)

 

 

Q3

 

Q2

 

2019

 

2018

 

2019

 

2018

 

13 Weeks Ended

 

13 Weeks Ended

 

13 Weeks Ended

 

13 Weeks Ended

(in thousands)

Sep 29, 2019

 

Sep 30, 2018

 

Jun 30, 2019

 

Jul 1, 2018

Revenue from services

$

636,793

 

 

$

680,371

 

 

$

588,594

 

 

$

614,301

 

Acquisition revenue excluded (3)

 

 

 

 

(10,324

)

 

 

Organic revenue

$

636,793

 

 

$

680,371

 

 

$

578,270

 

 

$

614,301

 

4.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOWS

(Unaudited)

 

 

Q3 2019

 

2018

 

2017

 

2016

 

39 Weeks Ended

 

52 Weeks Ended

 

52 Weeks Ended

 

53 Weeks Ended

(in thousands)

Sep 29, 2019

 

Dec 30, 2018

 

Dec 31, 2017

 

Jan 1, 2017

Net cash provided by operating activities

$

52,538

 

 

$

125,692

 

 

$

100,134

 

 

$

260,703

 

Capital expenditures

(18,297

)

 

(17,054

)

 

(21,958

)

 

(29,042

)

Free cash flows

$

34,241

 

 

$

108,638

 

 

$

78,176

 

 

$

231,661

 

(1)

 

Adjustment to the gain on the divestiture of our PlaneTechs business due to the finalization of costs incurred. PlaneTechs was sold mid-March 2018.

(2)

 

Amortization of intangible assets of acquired businesses.

(3)

 

Acquisition/integration costs for the acquisition of TMP Holding LTD (“TMP”) completed on June 12, 2018. Organic revenue excludes the first 12 months of operations of TMP.

(4)

 

Other adjustments for the 13 weeks ended September 29, 2019 primarily include implementation costs for cloud-based systems of $0.4 million and amortization of software as a service assets of $0.4 million which is reported in selling, general and administrative expense. Other adjustments for the 13 weeks ended September 30, 2018 include implementation costs for cloud-based systems of $1.5 million and accelerated vesting of stock associated with the CEO transition of $1.5 million. Other adjustments for the 13 weeks ended December 29, 2019 include estimated workforce reduction costs associated with employee reductions in the PeopleReady business of $2.3 million, implementation costs for cloud-based systems of $0.4 million and amortization of software as a service assets of $0.5 million.

(5)

 

Total tax effect of each of the adjustments to U.S. GAAP net income using the expected ongoing rate of 14 percent for 2019 and 16 percent for 2018.

(6)

 

Adjustment of the effective income tax rate to the expected ongoing rate of 14 percent for 2019 and 16 percent for 2018.

(7)

 

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.

 

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

Source: TrueBlue

IR CONTACT

Derrek Gafford

Chief Financial Officer

Phone: 1-253-680-8214

InvestorRelations@TrueBlue.com

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About TrueBlue

TrueBlue (NYSE: TBI) is a leading provider of specialized workforce solutions, helping clients improve growth and performance by providing staffing, workforce management, and recruitment process outsourcing solutions. The company’s specialized workforce solutions meet clients’ needs for a reliable, efficient workforce in a wide variety of industries. TrueBlue connects as many as 840,000 people to work each year.