TrueBlue Reports Fourth Quarter and Full-Year 2018 Results

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TACOMA, Wash.--(BUSINESS WIRE)-- TrueBlue (NYSE:TBI) today announced its fourth quarter and full-year results for 2018. Full-year revenue was $2.5 billion, which was flat compared to 2017. Net income per diluted share was $1.63, an increase of 22 percent, compared to $1.34 in 2017. Adjusted net income per diluted share1 was $2.28, an increase of 31 percent, compared to $1.74 in 2017.

Fourth quarter revenue was $650 million, a decrease of 3 percent, compared to revenue of $670 million in the fourth quarter of 2017. Net income per diluted share was $0.37, a decrease of 8 percent, compared to $0.40 in the fourth quarter of 2017. Adjusted net income per diluted share was $0.61, an increase of 20 percent, compared to $0.51 in the fourth quarter of 2017.

“Our 2018 results showed meaningful improvement in many parts of our business,” said Patrick Beharelle, CEO of TrueBlue. “PeopleReady, our largest segment, returned to revenue growth, and PeopleScout, our highest margin segment, delivered double-digit revenue growth. Our focus on lowering cost of services helped produce our third consecutive year of gross margin expansion, and we utilized a significant portion of cash flow to repurchase shares.

“During the year, TrueBlue made substantial progress on several strategic initiatives as well,” Mr. Beharelle added. “We divested PlaneTechs, which further concentrated our focus on more profitable, higher-growth markets. We also acquired TMP Holdings LTD, increasing PeopleScout’s ability to compete for more global business. On the digital front, we dispatched 3 million shifts via JobStackTM and achieved impressive user ratings. AffinixTM, PeopleScout’s proprietary talent acquisition platform, generated high interest among customers and received industry accolades for its compelling innovation.”

“Our fourth quarter results were in-line with our outlook for both revenue and earnings per share,” said Derrek Gafford, chief financial officer. “Effective cost management helped produce a 3 percent increase in gross profit. We continue to see opportunity in the marketplace and believe that our team has the right focus on business development, pricing and costs to deliver profitable growth in 2019.”

2019 Outlook

“Looking forward to the first quarter of 2019, we expect some revenue and pricing headwinds with certain clients in PeopleManagement and PeopleScout,” said Mr. Beharelle. “Despite the near-term challenges, we believe that we have the right focus and strategies for long-term growth. We continue to see a positive demand environment for our services and expect increased demand for PeopleReady services in the first quarter.”

TrueBlue estimates revenue for the first quarter of 2019 will range from $552 million to $569 million. The company also estimates net income per diluted share will range from $0.07 to $0.11 and adjusted net income per diluted share will range from $0.22 to $0.27.

Management will discuss fourth quarter and full-year 2018 results on a webcast at 2 p.m. PST (5 p.m. EST), today, Thursday, Feb. 7, 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, we connected approximately 730,000 people with work. Our PeopleReady segment offers industrial staffing services, PeopleManagement offers contingent and productivity-based on-site industrial 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     52 Weeks Ended
(in thousands, except per share data)     Dec 30, 2018     Dec 31, 2017 Dec 30, 2018     Dec 31, 2017
Revenue from services $ 650,147     $ 669,625 $ 2,499,207     $ 2,508,771
Cost of services     477,717       501,880   1,833,607       1,874,298  
Gross profit 172,430 167,745 665,600 634,473
Selling, general and administrative expense 145,280 132,644 550,632 510,794
Depreciation and amortization     10,272       11,465   41,049       46,115  
Income from operations 16,878 23,636 73,919 77,564
Interest and other income (expense), net     848       (24 ) 1,744       (14 )
Income before tax expense 17,726 23,612 75,663 77,550
Income tax expense     2,839       7,185   9,909       22,094  
Net income     $ 14,887       $ 16,427   $ 65,754       $

55,456

 
 
Net income per common share:
Basic $ 0.38 $ 0.41 $ 1.64 $ 1.35
Diluted $ 0.37 $ 0.40 $ 1.63 $ 1.34
 
Weighted average shares outstanding:
Basic 39,528 40,545 39,985 41,202
Diluted 39,926 40,856 40,275 41,441
 
 
TRUEBLUE, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
(in thousands)     Dec 30, 2018     Dec 31, 2017
ASSETS        
Cash and cash equivalents $ 46,988 $ 28,780
Accounts receivable, net 355,373 374,273
Other current assets     27,466       25,226
Total current assets 429,827 428,279
Property and equipment, net 57,671 60,163
Restricted cash and investments 235,443 239,231
Goodwill and intangible assets, net 328,695 331,309
Other assets, net     63,208       50,049
Total assets     $ 1,114,844       $ 1,109,031
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities $ 225,526 $ 212,419
Long-term debt, less current portion 80,000 116,489
Other long-term liabilities     217,879       225,276
Total liabilities 523,405 554,184
Shareholders’ equity     591,439       554,847
Total liabilities and shareholders’ equity     $ 1,114,844       $ 1,109,031
 
 
TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
    52 Weeks Ended
(in thousands)     Dec 30, 2018     Dec 31, 2017
Cash flows from operating activities:    
Net income $ 65,754 $ 55,456
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 41,049 46,115
Provision for doubtful accounts 10,042 6,808
Stock-based compensation 13,876 7,744
Deferred income taxes (1,929 ) 2,440
Other operating activities 5,154 2,349
Changes in operating assets and liabilities:
Accounts receivable 11,640 (28,483 )
Income tax receivable (996 ) 14,875
Other assets (12,928 ) 5,289
Accounts payable and other accrued expenses 2,855 (10,569 )
Accrued wages and benefits (1,447 ) (2,888 )
Workers’ compensation claims reserve (7,877 ) (1,048 )
Other liabilities     499       2,046  
Net cash provided by operating activities     125,692       100,134  
Cash flows from investing activities:
Capital expenditures (17,054 ) (21,958 )
Acquisition of business (22,742 ) —
Divestiture of business 10,587 —
Purchases of restricted investments (12,941 ) (50,601 )
Maturities of restricted investments 21,635 20,157
Other     —       (1,979 )
Net cash used in investing activities     (20,515 )     (54,381 )
Cash flows from financing activities:
Purchases and retirement of common stock (34,818 ) (36,680 )
Net proceeds from stock option exercises and employee stock purchase plans 1,503 1,646
Common stock repurchases for taxes upon vesting of restricted stock (3,404 ) (3,127 )
Net change in revolving credit facility (15,900 ) (16,607 )
Payments on debt (22,397 ) (2,267 )
Payment of contingent consideration at acquisition date fair value     —       (18,300 )
Net cash used in financing activities (75,016 ) (75,335 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (1,542 )     191  
Net change in cash, cash equivalents, and restricted cash 28,619 (29,391 )
Cash, cash equivalents and restricted cash, beginning of period     73,831       103,222  
Cash, cash equivalents and restricted cash, end of period     $ 102,450       $ 73,831  
 
 
TRUEBLUE, INC.
SEGMENT DATA

(Unaudited)

 
    13 Weeks Ended     52 Weeks Ended
(in thousands)     Dec 30, 2018     Dec 31, 2017 Dec 30, 2018     Dec 31, 2017
Revenue from services:
PeopleReady $ 399,116 $ 393,029 $ 1,522,076 $ 1,511,360
PeopleManagement 184,324 225,865 728,254 807,273
PeopleScout     66,707   50,731   248,877   190,138  
Total company     $ 650,147   $ 669,625   $ 2,499,207   $ 2,508,771  
 
Segment profit (1):
PeopleReady $ 22,045 $ 21,128 $ 85,998 $ 79,044
PeopleManagement 5,097 8,457 21,627 27,216
PeopleScout     11,680   10,283   47,383   39,354  
Total segment profit 38,822 39,868 155,008 145,614
Corporate unallocated expense     (6,065 ) (4,268 ) (26,066 ) (20,968 )
Total company Adjusted EBITDA 32,757 35,600 128,942 124,646
Work Opportunity Tax Credit processing fees (2) (285 ) (337 ) (985 ) (805 )
Acquisition/integration costs (3) (989 ) — (2,672 ) —
Other costs (4)     (4,333 ) (162 ) (10,317 ) (162 )
EBITDA 27,150 35,101 114,968 123,679
Depreciation and amortization (10,272 ) (11,465 ) (41,049 ) (46,115 )
Interest and other income (expense), net     848   (24 ) 1,744   (14 )
Income before tax expense 17,726 23,612 75,663 77,550
Income tax expense     (2,839 ) (7,185 ) (9,909 ) (22,094 )
Net income     $ 14,887   $ 16,427   $ 65,754   $ 55,456  
 
(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 costs not considered to be ongoing costs of the segment. Segment profit is comparable to segment adjusted EBITDA amounts reported in prior years.
 
(2) 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.
 
(3) Acquisition/integration costs relate to the acquisition of TMP Holdings LTD completed on June 12, 2018.
 
(4) Other costs for the 13 weeks and 52 weeks ended December 30, 2018 include implementation costs for cloud-based systems of $2.2 million and $6.7 million, respectively, and accelerated vesting of stock associated with the CEO transition of $2.1 million and $3.6 million, respectively. Other costs for the 13 weeks and 52 weeks ended December 31, 2017 include a workforce reduction charge of $2.5 million primarily associated with employee reductions in the PeopleReady business, offset by $2.3 million of workers' compensation benefit. The workers' compensation benefit is associated with the favorable settlement of insurance coverage associated with a former insurance company and other items not considered part of our core operations.
 

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 costs.

   

- 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:
- gain on divestiture,
- amortization of intangibles of acquired businesses, as well as accretion expense related to acquisition earn-out,
- acquisition/integration costs,
- other costs,
- 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 Revenue from services excluding acquired entity revenue. - 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)

 
    Q4 2018     Q4 2017     Q1 2019 Outlook*
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
(in thousands, except for per share data)     Dec 30, 2018 Dec 31, 2017 Mar 31, 2019
Net income $ 14,887 $ 16,427 $ 2,700 — $ 4,400
Amortization of intangible assets of acquired businesses (2) 5,162 5,331 5,000
Acquisition/integration costs (3) 989 — 700
Other costs (4) 4,333 162 1,600
Tax effect of adjustments to net income (5) (1,468 ) (1,538 ) (1,000)
Adjustment of income taxes to normalized effective rate (6)     357   574   —
Adjusted net income     $ 24,260   $ 20,956   $ 8,900 — $ 10,600
 
Adjusted net income, per diluted share $ 0.61 $ 0.51 $ 0.22 — $ 0.27
 
Diluted weighted average shares outstanding 39,926 40,856 39,800
* Totals may not sum due to rounding
2018 2017
52 Weeks Ended 52 Weeks Ended
(in thousands, except for per share data)           Dec 30, 2018 Dec 31, 2017
Net income $ 65,754 $ 55,456
Gain on divestiture (1) (718 ) —
Amortization of intangible assets of acquired businesses (2) 20,750 22,290
Acquisition/integration costs (3) 2,672 —
Other costs (4) 10,317 162
Tax effect of adjustments to net income (5) (5,074 ) (6,287 )
Adjustment of income taxes to normalized effective rate (6)           (1,843 ) 380  
Adjusted net income           $ 91,858   $ 72,001  
 
Adjusted net income, per diluted share $ 2.28 $ 1.74
 
Diluted weighted average shares outstanding 40,275 41,441
 
 
2. RECONCILIATION OF U.S. GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA

(Unaudited)

 
    Q4 2018     Q4 2017     Q1 2019 Outlook*
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
(in thousands)     Dec 30, 2018 Dec 31, 2017 Mar 31, 2019
Net income $ 14,887 $ 16,427 $ 2,700 — $ 4,400
Income tax expense 2,839 7,185 400 — 700
Interest and other (income) expense, net (848 ) 24 (600)
Depreciation and amortization     10,272   11,465   9,800

EBITDA

27,150 35,101 12,300 — 14,300
Work Opportunity Tax Credit processing fees (7) 285 337 200
Acquisition/integration costs (3) 989 — 700
Other costs (4)     4,333   162   1,600
Adjusted EBITDA     $ 32,757   $ 35,600   $ 14,800 — $ 16,800
* Totals may not sum due to rounding
 
2018 2017
52 Weeks Ended 52 Weeks Ended
(in thousands)           Dec 30, 2018 Dec 31, 2017
Net income $ 65,754 $ 55,456
Income tax expense 9,909 22,094
Interest and other (income) expense, net (1,744 ) 14
Depreciation and amortization           41,049   46,115
EBITDA 114,968 123,679
Work Opportunity Tax Credit processing fees (7) 985 805
Acquisition/integration costs (3) 2,672 —
Other costs (4)           10,317   162
Adjusted EBITDA           $ 128,942   $ 124,646
 
 
3. RECONCILIATION OF U.S. GAAP REVENUE TO ORGANIC REVENUE

(Unaudited)

 
Total Company     Q4 2018     Q4 2017     2018     2017
13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks Ended
(in thousands)     Dec 30, 2018 Dec 31, 2017 Dec 30, 2018 Dec 31, 2017
Revenue from services $ 650,147 $ 669,625 $ 2,499,207 $ 2,508,771
Acquired entity revenue (3)     (13,075 ) —   (30,958 )   —  
Organic revenue 637,072 669,625 2,468,249 2,508,771
Amazon revenue (8) (205 ) (24,052 ) (23,941 ) (53,435 )
PlaneTechs revenue (9)     —   (10,405 ) (8,005 )   (44,327 )
Organic revenue excluding Amazon and PlaneTechs     $ 636,867   $ 635,168   $ 2,436,303   $ 2,411,009  
 
 
Segments PeopleScout PeopleManagement
Q4 2018 Q4 2017 Q4 2018 Q4 2017
13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended
(in thousands)     Dec 30, 2018 Dec 31, 2017 Dec 30, 2018 Dec 31, 2017
Revenue from services 66,707 50,731 184,324 225,865
Acquired entity revenue (3)     (13,075 ) —   —     —  
Organic revenue 53,632 50,731 184,324 225,865
Amazon revenue (8) — — (205 ) (24,052 )
PlaneTechs revenue (9)     —   —   —     (10,405 )
Organic revenue excluding Amazon and PlaneTechs     $ 53,632   $ 50,731   $ 184,119   $ 191,408  
 
 
4. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOWS

(Unaudited)

 
    2018     2017     2016     2015
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
(in thousands)     Dec 30, 2018 Dec 31, 2017 Jan 1, 2017 Dec 25, 2015
Net cash provided by operating activities $ 125,692 $ 100,134 $ 260,703 $ 72,072
Capital expenditures     (17,054 ) (21,958 ) (29,042 ) (18,394 )
Free cash flows     $ 108,638   $ 78,176   $ 231,661   $ 53,678  
 
(1)     Gain on the divestiture of our PlaneTechs business sold mid-March 2018.
 
(2) Amortization of intangible assets of acquired businesses, as well as accretion expense related to the SIMOS acquisition earn-out for 2017.
 
(3) Acquisition/integration costs and acquired entity revenue relate to the acquisition of TMP Holdings LTD completed on June 12, 2018.
 
(4) Other costs for the 13 weeks and 52 weeks ended December 30, 2018 include implementation costs for cloud-based systems of $2.2 million and $6.7 million, respectively, and accelerated vesting of stock associated with the CEO transition of $2.1 million and $3.6 million, respectively. Other costs for the 13 weeks and 52 weeks ended December 31, 2017 include a workforce reduction charge of $2.5 million primarily associated with employee reductions in the PeopleReady business, offset by $2.3 million of workers' compensation benefit. The workers' compensation benefit is associated with the favorable settlement of insurance coverage associated with a former insurance company and other items not considered part of our core operations. Other costs for the 13 weeks ended March 31, 2019 include anticipated implementation costs for cloud-based systems of $1.3 million and amortization expense associated with software as a service assets of $0.3 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 2018, due to the enacted U.S. Tax Cuts and Jobs Act, and 28 percent for 2017.
 
(6) Adjustment of the effective income tax rate to the expected ongoing rate of 14 percent for 2018, due to the enacted U.S. Tax Cuts and Jobs Act, and 28 percent for 2017.
 
(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.
 
(8) Loss of Amazon Canadian business effective September 1, 2018.
 
(9) PlaneTechs business sold mid-March 2018.

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

Source: TrueBlue, Inc.

Released February 7, 2019