TRUEBLUE REPORTS FISCAL SECOND QUARTER 2018 RESULTS

TACOMA, WA-July 30, 2018-- TrueBlue, Inc. (NYSE:TBI) announced today its fiscal second quarter 2018 results.

Revenue was $614 million, an increase of 1 percent, compared to revenue of $610 million in the fiscal second quarter of 2017. Organic revenue1 excluding the divested PlaneTechs business increased by 2 percent. Net income per diluted share was $0.44, an increase of 42 percent, compared to $0.31 in the fiscal second quarter of 2017. Adjusted net income per diluted share2 was $0.57, an increase of 36 percent, compared to $0.42 in the fiscal second quarter of 2017.

“We are pleased with this quarter’s results which included revenue growth at PeopleReady, operating margin expansion and strong EPS growth,” TrueBlue CEO Steve Cooper said. “We experienced widespread revenue improvements in our PeopleReady business driven by a consistent focus on business development activity. Efforts to reduce our cost of services across all segments continue to produce value resulting in our tenth consecutive quarter of gross margin expansion.”

“We made strong progress advancing our key strategies. We acquired TMP Holdings in the United Kingdom, the world’s second largest RPO market. This acquisition increases our ability to win multi-continent engagements by adding a physical presence in Europe, referenceable clients and employer branding capabilities. On the technology front, JobStackTM, our PeopleReady mobile staffing technology, is transforming how people find work and how businesses find people. AffinixTM, our PeopleScout proprietary talent acquisition technology, is receiving praise from customers and a high level of interest from prospective clients.”

2018 Outlook

The company estimates revenue for the fiscal third quarter of 2018 will range from $662 million to $677 million. It also estimates net income per diluted share will range from $0.54 to $0.60 and adjusted net income per diluted share will range from $0.75 to $0.81.
Management will discuss fiscal second quarter 2018 results on a webcast at 2 p.m. PT (5 p.m. ET), today, Monday, July 30. 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, while connecting approximately 740,000 people with work in 2017. TrueBlue's 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 Organic revenue excludes acquired revenue.
2 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 customers, (3) our ability to maintain profit margins, (4) new laws and regulations that could have a material effect on our operations or financial results, (5) our ability to successfully complete and integrate acquisitions (6) our ability to attract sufficient qualified candidates and employees to meet the needs of our customers, (7) our ability to successfully execute on business strategies and initiatives such as the consolidation of our service lines and leveraging of mobile technology, and (8) uncertainty surrounding the interpretation and application of the recent 2017 Tax Cuts and Jobs Act and 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 a complete perspective 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.


Contact:
Derrek Gafford, EVP & CFO
253-680-8214




TRUEBLUE, INC.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
13 Weeks Ended
 
26 Weeks Ended
(in thousands, except per share data)
Jul 1, 2018
Jul 2, 2017
 
Jul 1, 2018
Jul 2, 2017
Revenue from services
$
614,301

$
610,122

 
$
1,168,689

$
1,178,366

Cost of services
448,717

454,842

 
859,837

883,657

Gross profit
165,584

155,280

 
308,852

294,709

Selling, general and administrative expense
134,207

124,754

 
259,970

246,598

Depreciation and amortization
10,101

12,287

 
20,191

23,461

Income from operations
21,276

18,239

 
28,691

24,650

Interest and other income (expense), net
(968
)
155

 
1,236

229

Income before tax expense
20,308

18,394

 
29,927

24,879

Income tax expense
2,576

5,260

 
3,440

7,071

Net income
$
17,732

$
13,134

 
$
26,487

$
17,808

 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
Basic
$
0.44

$
0.32

 
$
0.66

$
0.43

Diluted
$
0.44

$
0.31

 
$
0.65

$
0.43

 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
40,227

41,579

 
40,335

41,608

Diluted
40,469

41,856

 
40,576

41,875





TRUEBLUE, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(Unaudited)

(in thousands)
Jul 1, 2018
Dec 31, 2017
ASSETS
 
 
Cash and cash equivalents
$
33,408

$
28,780

Accounts receivable, net
370,588

374,273

Other current assets
28,970

25,226

Total current assets
432,966

428,279

Property and equipment, net
57,055

60,163

Restricted cash and investments
239,390

239,231

Goodwill and intangible assets, net
341,455

331,309

Other assets, net
53,354

50,049

Total assets
$
1,124,220

$
1,109,031

 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
Current liabilities
$
219,129

$
212,419

Long-term debt, less current portion
117,199

116,489

Other long-term liabilities
224,591

225,276

Total liabilities
560,919

554,184

Shareholders’ equity
563,301

554,847

Total liabilities and shareholders’ equity
$
1,124,220

$
1,109,031





























TRUEBLUE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
26 Weeks Ended
(in thousands)
Jul 1, 2018
Jul 2, 2017
Cash flows from operating activities:
 
 
Net income
$
26,487

$
17,808

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
20,191

23,461

Provision for doubtful accounts
5,571

3,619

Stock-based compensation
5,983

5,146

Deferred income taxes
1,373

2,975

Other operating activities
102

2,022

Changes in operating assets and liabilities:
 
 
Accounts receivable
888

11,925

Income tax receivable
(3,641
)
8,828

Other assets
(3,522
)
5,977

Accounts payable and other accrued expenses
3,767

(13,181
)
Accrued wages and benefits
(1,423
)
(4,560
)
Workers’ compensation claims reserve
(9,235
)
767

Other liabilities
2,900

(580
)
Net cash provided by operating activities
49,441

64,207

Cash flows from investing activities:
 
 
Capital expenditures
(6,468
)
(9,137
)
Acquisition of business
(22,742
)
—

Divestiture of business
8,800

—

Purchases of restricted investments
(10,730
)
(20,712
)
Maturities of restricted investments
13,044

13,546

Net cash used in investing activities
(18,096
)
(16,303
)
Cash flows from financing activities:
 
 
Purchases and retirement of common stock
(19,065
)
(15,530
)
Net proceeds from stock option exercises and employee stock purchase plans
757

858

Common stock repurchases for taxes upon vesting of restricted stock
(2,403
)
(2,873
)
Net change in revolving credit facility
21,300

(25,303
)
Payments on debt
(22,856
)
(1,133
)
Payment of contingent consideration at acquisition date fair value
—

(18,300
)
Net cash used in financing activities
(22,267
)
(62,281
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(919
)
(154
)
Net change in cash, cash equivalents, and restricted cash
8,159

(14,531
)
Cash, cash equivalents and restricted cash, beginning of period
73,831

103,222

Cash, cash equivalents and restricted cash, end of period
$
81,990

$
88,691









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:
- adjustment to the 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
- adjusted 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.

1.
RECONCILIATION OF U.S. GAAP NET INCOME TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME, PER DILUTED SHARE
(Unaudited)
 
Q2 2018
 
Q2 2017
 
Q3 2018 Outlook*
 
13 Weeks Ended
 
13 Weeks Ended
 
13 Weeks Ended
(in thousands, except for per share data)
Jul 1, 2018
 
Jul 2, 2017
 
Sep 30, 2018
Net income
$
17,732

 
$
13,134

 
$ 21,700 — $ 24,200
Adjustment to the gain on divestiture (1)
290

 
—

 
—
Amortization of intangible assets of acquired businesses (2)
5,174

 
5,742

 
5,200
Acquisition/integration costs (3)
457

 
—

 
1,600
Other costs (4)
1,264

 
—

 
3,000
Tax effect of adjustments to net income (5)
(1,150
)
 
(1,608
)
 
(1,600)
Adjustment of income taxes to normalized effective rate (6)
(673
)
 
110

 
—
Adjusted net income
$
23,094

 
$
17,378

 
$ 29,900 — $ 32,400
 
 
 
 
 
 
Adjusted net income, per diluted share
$
0.57

 
$
0.42

 
$ 0.75 — $ 0.81
 
 
 
 
 
 
Diluted weighted average shares outstanding
40,469

 
41,856

 
40,100





2.
RECONCILIATION OF U.S. GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
Q2 2018
 
Q2 2017
 
Q3 2018 Outlook*
 
13 Weeks Ended
 
13 Weeks Ended
 
13 Weeks Ended
(in thousands)
Jul 1, 2018
 
Jul 2, 2017
 
Sep 30, 2018
Net income
$
17,732

 
$
13,134

 
$ 21,700 — $ 24,200
Income tax expense
2,576

 
5,260

 
4,100 — 4,600
Interest and other (income) expense, net
968

 
(155
)
 
200
Depreciation and amortization
10,101

 
12,287

 
10,400
EBITDA
31,377

 
30,526

 
36,500 — 39,500
Work Opportunity Tax Credit processing fees (7)
264

 
16

 
200
Acquisition/integration costs (3)
457

 
—

 
1,600
Other costs (4)
1,264

 
—

 
3,000
Adjusted EBITDA
$
33,362

 
$
30,542

 
$ 41,300 — $ 44,300
* Totals may not sum due to rounding
 
 
 
 
 
3.
RECONCILIATION OF U.S. GAAP REVENUE TO ORGANIC REVENUE
(Unaudited)
 
Q2 2018
 
Q2 2017
 
13 Weeks Ended
 
13 Weeks Ended
(in thousands)
Jul 1, 2018
 
Jul 2, 2017
Revenue from services
$
614,301

 
$
610,122

Acquired entity revenue
(2,851
)
 
—

Organic revenue
$
611,450

 
$
610,122

(1)
Adjustment to the gain on the divestiture of our PlaneTechs service line as we continue to finalize actual costs incurred. PlaneTechs was sold mid-March 2018.

(2)
Amortization of intangible assets of acquired businesses as well as accretion expense related to the SIMOS acquisition earn-out.

(3)
Acquisition/integration costs relate to the acquisition of TMP Holdings LTD completed on June 12, 2018.

(4)
Other costs for the 13 weeks ended Jul. 1, 2018 and the Q3 2018 outlook include implementation costs for cloud-based systems. Other costs included in the Q3 2018 outlook also include accelerated vesting of stock per the CEO’s employment contract associated with the leadership transition.

(5)
Total tax effect of each of the adjustments to U.S. GAAP net income using the expected ongoing rate of 16 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 16 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 and reduce our income taxes.




TRUEBLUE, INC.
SEGMENT INFORMATION


3.SEGMENT DATA
(Unaudited)
 
13 Weeks Ended
(in thousands)
Jul 1, 2018
Jul 2, 2017
Revenue from services:
 
 
PeopleReady
$
377,460

$
370,712

PeopleManagement
178,839

192,887

PeopleScout
58,002

46,523

Total company
614,301

610,122

 
 
 
Segment profit (1):
 
 
PeopleReady
$
23,198

$
19,170

PeopleManagement
4,712

6,286

PeopleScout
11,320

10,129

Total segment profit
39,230

35,585

Corporate unallocated expense
(5,868
)
(5,043
)
Total company Adjusted EBITDA
33,362

30,542

Work Opportunity Tax Credit processing fees (2)
(264
)
(16
)
Acquisition/integration costs (3)
(457
)
—

Other costs (4)
(1,264
)
—

EBITDA
31,377

30,526

Depreciation and amortization
(10,101
)
(12,287
)
Interest and other income (expense), net
(968
)
155

Income before tax expense
20,308

18,394

Income tax expense
(2,576
)
(5,260
)
Net income
$
17,732

$
13,134

(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 and reduce our income taxes.

(3)
Acquisition/integration costs relate to the acquisition of TMP Holdings LTD completed on June 12, 2018.

(4)
Other costs include implementation costs for cloud-based systems.