TRUEBLUE, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

COMMENT ON FORWARD LOOKING STATEMENTS


Certain statements in this Form 10-Q, other than purely historical information,
including estimates, projections, statements relating to our business plans,
objectives and expected operating results, the impact of and our ongoing
response to COVID-19, and the assumptions upon which those statements are based,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
involve risks and uncertainties, and future events and circumstances could
differ significantly from those anticipated in the forward-looking statements.
These forward-looking statements generally are identified by the words
"believe," "project," "expect," "anticipate," "estimate," "intend," "strategy,"
"future," "opportunity," "goal," "plan," "may," "should," "will," "would," "will
be," "will continue," "will likely result," and similar expressions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties, which may cause actual results to
differ materially from those expressed or implied in our forward-looking
statements, including the risks and uncertainties described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (Part
I, Item 2 of this Form 10-Q),"Quantitative and Qualitative Disclosures about
Market Risk" (Part I, Item 3 of this Form 10-Q), and "Risk Factors" (Part II,
Item 1A of this Form 10-Q). We undertake no duty to update or revise publicly
any of the forward-looking statements after the date of this report or to
conform such statements to actual results or to changes in our expectations,
whether because of new information, future events, or otherwise.

BUSINESS OVERVIEW


TrueBlue, Inc. (the "company," "TrueBlue," "we," "us" and "our") is a leading
provider of specialized workforce solutions that help our clients improve
productivity and grow their businesses. Client demand for contingent workforce
solutions and outsourced recruiting services is cyclical and dependent on the
overall strength of the economy and labor market, as well as trends in workforce
flexibility. During periods of rising economic uncertainty, clients reduce their
contingent labor in response to lower volumes and reduced appetite for expanding
production or inventory, which reduces the demand for our services. That
environment also reduces demand for permanent placement recruiting, whether
outsourced or in-house. However, as the economy emerges from periods of
uncertainty, contingent labor providers are uniquely positioned to respond
quickly to increasing demand for labor and rapidly fill new or temporary
positions, replace absent employees, and convert fixed labor costs to variable
costs. Similarly, companies often reduce or eliminate their in-house recruiting
teams during economic downturns, and turn to hybrid or fully outsourced
recruiting models during periods of rapid re-hiring and high employee turnover.
In order to competitively differentiate our services in these highly fragmented
industries, we are committed to executing our digital strategies, combined with
a focus on improving operational efficiencies in order to gain market share. We
have implemented these core strategies for each of our business segments:
PeopleReady, PeopleManagement and PeopleScout.

PeopleReady


PeopleReady, our largest segment by revenue, provides clients with access to
qualified associates through a wide range of staffing solutions for on-demand
contingent general and skilled labor. PeopleReady connects people with work in a
broad range of industries through our network of branches across all 50 states
in the United States ("U.S."), Canada and Puerto Rico, and increasingly through
our industry-leading mobile app, JobStackTM. JobStack creates a virtual exchange
between our associates and clients, and allows our branch resources to expand
their recruiting, sales and service delivery efforts. JobStack is competitively
differentiating our services, expanding our reach into new demographics, and
improving our service delivery and work order fill rates.

People Management


PeopleManagement, our second largest segment by revenue, provides recruitment
and on-site management of a facility's contingent industrial workforce
throughout the U.S., Canada and Puerto Rico. In comparison with PeopleReady,
services are larger in scale and longer in duration, and dedicated service teams
are located at the client's facility as an integral part of the production and
logistics process. We offer scalable solutions to meet the volume requirements
of labor-intensive manufacturing, warehousing and distribution facilities, by
providing large-scale sourcing, screening, recruiting and management of the
contingent workforce. PeopleManagement also provides dedicated and contingent
commercial truck drivers to the transportation and distribution industries
through our Centerline Drivers ("Centerline") brand. Centerline matches drivers
to each client's specific needs, allowing them to improve productivity, control
costs, ensure compliance and deliver improved service. Our primary focus at
PeopleManagement continues to be growing our client base by targeting local and
underserved markets, as well as investing in customer and associate care
programs to improve retention.


                                   Page - 16

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




PeopleScout

PeopleScout, our smallest segment by revenue, offers recruitment process
outsourcing ("RPO") and managed service provider ("MSP") solutions to a wide
variety of industries and geographies, primarily in the U.S., Canada, the United
Kingdom and Australia. PeopleScout provides RPO services that manage talent
solutions spanning the global economy and talent advisory capabilities
supporting total workforce needs. Our programs deliver improved talent quality
and candidate experience, faster hiring, increased scalability, lower cost of
recruitment, greater flexibility, and improved regulatory compliance. We
leverage our proprietary technology platform (AffinixTM) for sourcing, screening
and delivering a permanent workforce, along with dedicated service delivery
teams to work as an integrated partner with our clients. PeopleScout also
includes our MSP business, which manages our clients' contingent labor programs
including vendor selection, performance management, compliance monitoring and
risk management. Our primary focus at PeopleScout is to leverage our strong
brand reputation, continued investments in our sales team, and use of our
proprietary technology platform (Affinix) to capture opportunities in an
industry that is expanding rapidly post-pandemic.

Fiscal second quarter of 2022 highlights


Our strong performance continued, as total company revenue grew 10.3% to $569.3
million for the thirteen weeks ended June 26, 2022, compared to the same period
in the prior year, driven by continued demand for our services. PeopleReady
revenue grew 6.2% due to higher bill rates and improvement in labor supply,
partially offset by slowing demand. PeopleManagement revenue grew 6.3%, fueled
by existing client growth, as well as strong demand for commercial trucking
services. PeopleScout revenue grew 39.0% due to historically high employee
turnover rates at existing clients, and project work for new clients who are
utilizing our services to fulfill short-term hiring needs.

Total company gross profit as a percentage of revenue for the thirteen weeks
ended June 26, 2022 increased by 140 basis points to 27.8%, compared to 26.4%
for the same period in the prior year. This increase was primarily driven by
higher bill rates compared to pay rates, and sales mix trending toward higher
margin clients and segments.

Total company selling, general and administrative ("SG&A") expense increased
10.4% to $122.0 million, for the thirteen weeks ended June 26, 2022, compared to
the same period in the prior year. The overall increase in SG&A expense was
primarily to support revenue growth of 10.3%.

Revenue growth, along with an improvement in gross profit as a percentage of
revenue, resulted in net income improving 51.2% to $24.0 million for the
thirteen weeks ended June 26, 2022 compared to $15.9 million for the same period
in the prior year.

As of June 26, 2022, we were in a strong financial position with cash and cash
equivalents of $32.4 million, no outstanding debt, and $292.7 million available
under our revolving credit agreement ("Revolving Credit Facility"), for total
liquidity of $325.2 million.


                                   Page - 17

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




RESULTS OF OPERATIONS

Total company results

The following table presents selected financial data:


                                                Thirteen weeks ended                                                 Twenty-six weeks ended
(in thousands, except percentages    Jun 26,                         Jun 27,                                   Jun 26,                          Jun 27,
and per share data)                   2022         % of revenue        2021           % of revenue               2022         % of revenue        2021           % of revenue
Revenue from services             $  569,253                       $ 515,955                                $ 1,120,768                       $ 974,661

Gross profit                      $  158,531               27.8  % $ 136,468                  26.4  %       $   298,376               26.6  % $ 247,042                  25.3  %
Selling, general and                 122,034               21.4      110,508                  21.4              242,602               21.6      207,909                  21.3
administrative expense
Depreciation and amortization          7,245                1.3        7,017                   1.4               14,532                1.3       13,979                   1.4

Income from operations                29,252                5.1  %    18,943                   3.7  %            41,242                3.7  %    25,154                   2.6  %
Interest expense and other              (110)                            724                                        395                           1,299
income, net
Income before tax expense             29,142                          19,667                                     41,637                          26,453
Income tax expense                     5,129                           3,783                                      7,105                           3,671
Net income                        $   24,013                4.2  % $  15,884                   3.1  %       $    34,532                3.1  % $  22,782                   2.3  %

Net income per diluted share      $     0.72                       $    0.45                                $      1.02                       $    0.65


Revenue from services

                                                         Thirteen weeks ended                                                         Twenty-six weeks ended
(in thousands, except             Jun 26,                     Segment % of    Jun 27,     Segment % of           Jun 26,        Growth      Segment % of    Jun 27,     Segment % of
percentages)                        2022        Growth %         total          2021         total                 2022            %           total          2021         total
Revenue from services:
PeopleReady                     $ 317,943             6.2  %        55.9  % $ 299,316           58.0  %       $   623,633          11.4  %        55.6  % $ 559,708           57.4  %
PeopleManagement                  161,938             6.3  %        28.4      152,356           29.5              325,757           7.1  %        29.1      304,110           31.2
PeopleScout                        89,372            39.0  %        15.7       64,283           12.5              171,378          54.6  %        15.3      110,843           11.4
Total company                   $ 569,253            10.3  %       100.0  % $ 515,955          100.0  %       $ 1,120,768          15.0  %       100.0  % $ 974,661          100.0  %


Total company revenue grew 10.3% to $569.3 million for the thirteen weeks ended
June 26, 2022, and grew 15.0% to $1,120.8 million for the twenty-six weeks ended
June 26, 2022, compared to the same periods in the prior year, respectively. The
growth was driven by continued demand for our services.

PeopleReady


PeopleReady revenue grew 6.2% to $317.9 million for the thirteen weeks ended
June 26, 2022, and grew 11.4% to $623.6 million for the twenty-six weeks ended
June 26, 2022, compared to the same periods in the prior year. PeopleReady's
revenue growth was driven by higher bill rates across most geographies and
industries. While worker supply trends continued to improve, we experienced a
slowing of client demand during the thirteen weeks ended June 26, 2022. Revenue
in April grew 10.8%, compared to the same period in the prior year, and was
widespread across most geographies. However, growth tapered to 2.7% in June,
compared to the same period in the prior year, as clients reassessed their labor
needs on new projects across most geographies and industries, most notably
within the services and hospitality industries, given the current economic
climate.

We believe the revenue growth has been supported by the use of our JobStack
mobile app that digitally connects associates with work. During the second
quarter of 2022, PeopleReady dispatched approximately 847,000 shifts via
JobStack, compared to 788,000 for the same period in the prior year, and our
digital fill rate increased to 63% at the higher volume of revenue, compared to
58% for the same period in the prior year.


                                   Page - 18

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




PeopleManagement

PeopleManagement revenue grew 6.3% to $161.9 million for the thirteen weeks
ended June 26, 2022, and grew 7.1% to $325.8 million for the twenty-six weeks
ended June 26, 2022, compared to the same periods in the prior year.
PeopleManagement's revenue growth was driven by existing client growth, despite
the global supply chain challenges, as well as strong demand for commercial
trucking services.

PeopleScout


PeopleScout revenue grew 39.0% to $89.4 million for the thirteen weeks ended
June 26, 2022, and grew 54.6% to $171.4 million for the twenty-six weeks ended
June 26, 2022, compared to the same periods in the prior year. Revenue growth
has been stimulated by historically high employee turnover rates, creating
increased demand at existing clients and project work for new clients who are
utilizing our services to fulfill short-term hiring needs.

gross profit


                                          Thirteen weeks ended                    Twenty-six weeks ended
(in thousands, except percentages)   Jun 26, 2022      Jun 27, 2021            Jun 26, 2022     Jun 27, 2021
Gross profit                       $      158,531    $      136,468          $      298,376    $    247,042
Percentage of revenue                        27.8  %           26.4  %                 26.6  %         25.3  %


Gross profit as a percentage of revenue grew 140 basis points to 27.8% for the
thirteen weeks ended June 26, 2022, compared to 26.4% for the same period in the
prior year. Our staffing businesses contributed 100 basis points of expansion of
which 60 basis points was attributable to higher bill rates, which have
increased ahead of pay rates. The remaining 40 basis points was primarily
attributable to favorable customer mix. Our PeopleScout business, which is our
highest margin business, is becoming a larger portion of overall sales mix, and
contributed 40 basis points of expansion.

Gross profit as a percentage of revenue grew 130 basis points to 26.6% for the
twenty-six weeks ended June 26, 2022, compared to 25.3% for the same period in
the prior year. Our staffing businesses contributed 100 basis points of
expansion, of which 50 basis points was attributable to higher bill rates, which
have increased ahead of pay rates. An additional 40 basis points was primarily
from favorable customer mix, and the remaining 10 basis points was due to
favorable segment revenue mix. Our PeopleScout business, which is our highest
margin business, is becoming a larger portion of overall sales mix, which
contributed 30 basis points of expansion.

SG&A expense


                                            Thirteen weeks ended                   Twenty-six weeks ended
(in thousands, except percentages)     Jun 26, 2022      Jun 27, 2021           Jun 26, 2022   Jun 27, 2021
Selling, general and administrative
expense                              $      122,034    $      110,508          $   242,602    $    207,909
Percentage of revenue                          21.4  %           21.4  %              21.6  %         21.3  %


Total company SG&A expense increased by $11.5 million or 10.4% for the thirteen
weeks ended June 26, 2022, compared to the same period in the prior year,
consistent with revenue growth of 10.3% over the same period. Included in SG&A
expense in the current year are $1.7 million in expenses related to investments
we are making to replace our PeopleReady technology platform to better support
our digital strategy and new service delivery models, which began during the
fiscal fourth quarter of 2021, offset by the reversal of $3.3 million of accrued
compensation related to the resignation of our former Chief Executive Officer.
Included in SG&A expense in the prior year was a benefit of $2.3 million for
government employment subsidies related to the coronavirus pandemic ("COVID-19")
relief.

Total company SG&A expense increased by $34.7 million or 16.7% for the
twenty-six weeks ended June 26, 2022, compared to the same period in the prior
year, primarily to support revenue growth of 15.0% over the same period. As a
percentage of revenue, SG&A expense increased 30 basis points for the twenty-six
weeks ended June 26, 2022, compared to the same period in the prior year, the
majority of which was related to $4.3 million of costs incurred to replace our
PeopleReady technology platform to better support our digital strategy and new
service delivery models, which began during the fiscal fourth quarter of 2021,
offset by the reversal of $3.3 million of accrued compensation related to the
resignation of our former Chief Executive Officer. Included in SG&A expense in
the prior year was a benefit of $3.9 million for government employment subsidies
related to COVID-19 relief.


                                   Page - 19

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




Depreciation and amortization

                                            Thirteen weeks ended                  Twenty-six weeks ended
(in thousands, except percentages)     Jun 26, 2022      Jun 27, 2021          Jun 26, 2022    Jun 27, 2021
Depreciation and amortization        $       7,245     $       7,017          $    14,532     $     13,979
Percentage of revenue                          1.3   %           1.4  %               1.3   %          1.4  %


Depreciation and amortization increased for the thirteen weeks and twenty-six
weeks ended June 26, 2022 compared to the same periods in the prior year, due to
certain assets placed into service during 2021, slightly offset by assets
becoming fully amortized during 2021.

Income taxes


                                                 Thirteen weeks ended                Twenty-six weeks ended
(in thousands, except percentages)            Jun 26, 2022   Jun 27, 2021         Jun 26, 2022    Jun 27, 2021
Income tax expense                           $    5,129     $     3,783          $     7,105     $     3,671
Effective income tax rate                          17.6   %        19.2  %              17.1   %        13.9  %


Our tax provision and our effective tax rate are subject to variation due to
several factors, including variability in accurately predicting our annual
pre-tax and taxable income and loss by jurisdiction, tax credits, government
audit developments, changes in laws, regulations and administrative practices,
and relative changes of expenses or losses for which tax benefits are not
recognized. Additionally, our effective tax rate can be more or less volatile
based on the amount of pre-tax income and loss. For example, the impact of
discrete items, tax credits and non-deductible expenses on our effective tax
rate is greater when our pre-tax income or loss is lower.

The items creating a difference between income taxes computed at the statutory
federal income tax rate and income taxes reported on the Consolidated Statements
of Operations and Comprehensive Income are as follows:

                                                      Thirteen weeks ended                                              Twenty-six weeks ended

(in thousands, except percentages) June 26, 2022 % June 27, 2021 %

                Jun 26, 2022          %        Jun 27, 2021        %
Income before tax expense          $    29,142                   $      19,667                      $     41,637                     $      26,453

Federal income tax expense at
statutory rate                     $     6,120          21.0%    $       4,130       21.0%          $      8,744            21.0%    $       5,555       21.0%
Increase (decrease) resulting
from:
State income taxes, net of federal
benefit                                  1,097           3.8               991        5.0                  1,571             3.8             1,279        4.8

Coronavirus Aid, Relief and
Economic Security Act                        -            -               (574)      (2.9)                     -              -               (438)      (1.7)
Hiring tax credits, net                 (2,708)         (9.3)             (669)      (3.4)                (3,850)           (9.2)           (3,406)      (12.9)
Non-deductible and non-taxable
items                                      156           0.5                88        0.4                    419             1.0               311        1.2
Stock-based compensation                    24           0.1               (25)      (0.1)                  (595)           (1.4)              266        1.0
Foreign taxes and other, net               440           1.5              (158)      (0.8)                   816             1.9               104        0.5
Income tax expense                 $     5,129          17.6%    $       3,783       19.2%          $      7,105            17.1%    $       3,671       13.9%


For the thirteen weeks ended June 26, 2022, we incurred income tax expense of
$5.1 million and had an effective tax rate of 17.6%, compared to $3.8 million
and 19.2% for the same period in the prior year. For the twenty-six weeks ended
June 26, 2022, we incurred income tax expense of $7.1 million and had an
effective tax rate of 17.1%, compared to $3.7 million and 13.9% for the same
period in the prior year.

The difference between the statutory federal income tax rate of 21% and our
effective tax rate of 17.1% for the twenty-six weeks ended June 26, 2022 was
primarily due to the benefit of hiring credits, including the Work Opportunity
Tax Credit ("WOTC"), as well as stock-based compensation, partially offset by
state income taxes and other items. The lower tax rate in the prior year was
primarily due to a larger percentage benefit from hiring credits as a result of
lower pre-tax income.


                                   Page - 20

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




WOTC, our primary hiring tax credit, is designed to encourage employers to hire
workers from certain targeted groups with higher than average unemployment
rates. WOTC is generally calculated as a percentage of wages over a twelve-month
period up to worker maximums by targeted groups. Based on historical results and
business trends, we estimate the amount of WOTC we expect to earn related to
wages of the current year. However, the estimate is subject to variation because
1) a small percentage of our workers qualify for one or more of the many
targeted groups; 2) the targeted groups are subject to different incentive
credit rates and limitations; 3) credits fluctuate depending on economic
conditions and qualified worker retention periods; and 4) state and federal
offices can delay their credit certification processing and have inconsistent
certification rates. We recognize an adjustment to prior year hiring credits if
credits certified by government offices differ from original estimates. The U.S.
Congress has approved the WOTC program through the end of 2025.

Segment performance


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 asset impairment charges, depreciation and
amortization expense, unallocated corporate general and administrative expense,
interest expense, other income and expense, income taxes, and other adjustments
not considered to be ongoing. See Note 11: Segment Information, to our
consolidated financial statements found in Item 1 of this Quarterly Report on
Form 10-Q, for additional details on our reportable segments, as well as a
reconciliation of segment profit to income before tax expense.

Segment profit should not be considered a measure of financial performance in
isolation or as an alternative to net income on the Consolidated Statements of
Operations and Comprehensive Income in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"), and may not be
comparable to similarly titled measures of other companies.

PeopleReady segment performance was as follows:


                                                  Thirteen weeks ended                 Twenty-six weeks ended
(in thousands, except percentages)            Jun 26, 2022    Jun 27, 2021          Jun 26, 2022   Jun 27, 2021
Revenue from services                        $    317,943    $    299,316          $   623,633    $    559,708
Segment profit                                     20,325          18,437               36,544          30,297
Percentage of revenue                                 6.4  %          6.2  %               5.9  %          5.4  %


PeopleReady segment profit grew $1.9 million and $6.2 million for the thirteen
and twenty-six weeks ended June 26, 2022, and also improved as a percentage of
revenue, compared to the same periods in the prior year, respectively. Segment
profit growth was primarily due to higher bill rates, which have increased ahead
of pay rates as the labor supply has improved.

People Management segment performance was as follows:


                                                   Thirteen weeks ended                 Twenty-six weeks ended
(in thousands, except percentages)             Jun 26, 2022    Jun 27, 2021          Jun 26, 2022   Jun 27, 2021
Revenue from services                         $    161,938    $    152,356          $   325,757    $    304,110
Segment profit                                       4,228           3,221                7,207           6,337
Percentage of revenue                                  2.6  %          2.1  %               2.2  %          2.1  %

People Management segment profit grew $1.0 million and $0.9 million for the thirteen and twenty-six weeks ended June 26, 2022, and also improved as a percentage of revenue, compared to the same periods in the prior year, respectively. Segment profit growth was primarily due to favorable client mix within our On-Site operating segment toward our higher margin, productivity-based (cost per unit) pricing option.

PeopleScout segment performance was as follows:


                                                  Thirteen weeks ended                Twenty-six weeks ended
(in thousands, except percentages)            Jun 26, 2022   Jun 27, 2021          Jun 26, 2022   Jun 27, 2021
Revenue from services                        $    89,372    $     64,283          $   171,378    $    110,843
Segment profit                                    20,593          10,857               31,565          14,894
Percentage of revenue                               23.0  %         16.9  %              18.4  %         13.4  %




                                   Page - 21

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




PeopleScout segment profit grew $9.7 million and $16.7 million for the thirteen
and twenty-six weeks ended June 26, 2022, and also improved as a percentage of
revenue, compared to the same periods in the prior year, respectively. Segment
profit improved as a result of operating leverage as volumes increased due to
historically high employee turnover rates at existing clients.

FUTURE OUTLOOK


The following highlights represent our operating outlook for the fiscal third
quarter and full year of 2022. These expectations are subject to revision as our
business changes with the overall economy.

operating outlook


•We are not providing customary revenue guidance for the fiscal third quarter of
2022. Our historical third quarter sequential revenue growth has been
approximately 9% over the prior five years, excluding the fiscal third quarter
of 2020. However, revenue trends at PeopleReady exiting June 2022 imply total
company sequential revenue growth of between 3% and 5%.

•We anticipate gross margin expansion of between 120 and 160 basis points for
the fiscal third quarter of 2022 compared to the same period in the prior year.
For fiscal 2022, we anticipate gross margin expansion of between 40 and 100
basis points, compared to the prior year. We expect gross margin to expand due
to shifts in revenue mix toward our PeopleScout segment, as well as higher bill
rates compared to pay rates within our staffing businesses.

•For the fiscal third quarter of 2022, we anticipate SG&A expense to be between
$126 million and $130 million. For fiscal 2022, we anticipate SG&A expense to be
between $501 million and $507 million. This includes approximately $3 million
for the fiscal third quarter of 2022 and $11 million for fiscal 2022 in costs to
implement new cloud-based solutions to replace our technology platform at
PeopleReady. We will continue to exercise disciplined cost management while
making investments in sales resources and digital strategies to drive profitable
revenue growth.

•We expect our effective income tax rate for fiscal 2022 to be between 14% and 18%.


Liquidity outlook

•Capital expenditures and spending for software as a service assets for the
fiscal third quarter of 2022 are expected to be approximately $14 million, and
between $40 million and $44 million for fiscal 2022. We remain committed to
technological innovation to transform our business for a digital future. We
continue to make investments in online and mobile apps to improve access to
associates and candidates, as well as improve the speed and ease of connecting
them with our clients. We expect these investments will increase the competitive
differentiation of our services over the long term, improve the efficiency of
our service delivery, and reduce PeopleReady's dependence on local branches to
find associates and connect them with work. Examples include PeopleReady's
JobStack mobile app and PeopleScout's Affinix talent acquisition technology.


                                   Page - 22

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS



LIQUIDITY AND CAPITAL RESOURCES


We believe we have a strong financial position and sufficient sources of funding
to meet our short and long term obligations. As of June 26, 2022 we had $32.4
million in cash and cash equivalents, up to $300 million provided under our
revolving credit agreement, of which $7.3 million was utilized by outstanding
standby letters of credit leaving, $292.7 million available under our Revolving
Credit Facility. We have an option to increase the total line of credit amount
from $300 million to $450 million, subject to bank approval.

Cash generated through our core operations is our primary source of liquidity.
Our principal ongoing cash needs are to finance working capital, fund capital
expenditures, repay outstanding Revolving Credit Facility balances, and execute
share repurchases. We manage working capital through timely collection of
accounts receivable, which we achieve through focused collection efforts and
tightly monitoring trends in days sales outstanding. While client payment terms
are generally 90 days or less, we pay our associates weekly, so additional
financing through the use of our Revolving Credit Facility is sometimes
necessary to support revenue growth. We also manage working capital through
efficient cost management and strategically timing payments of accounts payable.

We remain committed to technological innovation to transform our business for a
digital future. As part of executing this strategy, we continue to make
investments in online and mobile apps to improve access to associates and
candidates, as well as to improve the speed and ease of connecting our clients
and associates for our staffing business, and candidates for our RPO business.
We expect these investments will increase the competitive differentiation of our
services over the long term, improve the efficiency of our service delivery
model, and reduce PeopleReady's dependence on local branches to find associates
and connect them with work. In addition, we continue to transition our
back-office technology from on-premise software platforms to cloud-based
software solutions, to increase automation and the efficiency of running our
business.

Outside of ongoing cash needed to support core operations, our insurance
carriers and certain state workers' compensation programs require us to
collateralize a portion of our workers' compensation obligation, for which they
become responsible should we become insolvent. On a regular basis, these
entities assess the amount of collateral they will require from us relative to
our workers' compensation obligation. Such amounts can increase or decrease
independent of our assessments and reserves. We continue to have risk that these
collateral requirements may be increased by our insurers due to our loss history
and market dynamics. We generally anticipate that our collateral commitments
will continue to grow as we grow our business. We pay our premiums and deposit
our collateral in installments. The collateral typically takes the form of cash
and cash-backed instruments, highly rated investment grade securities, letters
of credit, and surety bonds. Restricted cash and investments supporting our
self-insured workers' compensation obligation are held in a trust at the Bank of
New York Mellon ("Trust"), and are used to pay workers' compensation claims as
they are filed. See Note 5: Workers' Compensation Insurance and Reserves, and
Note 3: Restricted Cash and Investments, to our consolidated financial
statements found in Item 1 of this Quarterly Report on Form 10-Q, for details on
our workers' compensation program as well as the restricted cash and investments
held in Trust.

We have established investment policy directives for the Trust with the first
priority to preserve capital, second to ensure sufficient liquidity to pay
workers' compensation claims, third to diversify the investment portfolio and
fourth to maximize after-tax returns. Trust investments must meet minimum
acceptable quality standards. The primary investments include U.S. Treasury
securities, U.S. agency debentures, U.S. agency mortgages, corporate securities
and municipal securities. For those investments rated by nationally recognized
statistical rating organizations, the minimum ratings at time of purchase are:

                                            S&P       Moody's    Fitch
                   Short-term rating     A-1/SP-1    P-1/MIG-1    F-1
                   Long-term rating          A          A2         A


Total collateral commitments decreased $7.6 million during the twenty-six week
period ended June 26, 2022 primarily due to lower collateral requirements from
our insurance carriers and the use of collateral to satisfy workers'
compensation claims. See Note 7: Commitments and Contingencies, to our
consolidated financial statements found in Item 1 of this Quarterly Report on
Form 10-Q, for additional details on our workers' compensation commitments. We
continue to actively manage workers' compensation cost through the safety of our
associates with our safety programs, and actively control costs with our network
of service providers. These actions have had a positive impact creating
favorable adjustments to workers' compensation liabilities recorded in the prior
periods. Continued favorable adjustments to our prior year workers' compensation
liabilities are dependent on our ability to continue to aggressively lower
accident rates and costs of our claims. We expect diminishing favorable
adjustments to our workers' compensation liabilities as the opportunity for
significant reduction to the frequency and severity of accident rates
diminishes.


                                   Page - 23

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




Restricted cash and investments also includes collateral to support our
non-qualified deferred compensation plan in the form of company-owned life
insurance policies. Our non-qualified deferred compensation plan is managed by a
third-party service provider, and the investments backing the company-owned life
insurance policies align with the amount and timing of payments based on
employee elections.

A summary of our cash flows for each period are as follows:


                                                                           Twenty-six weeks ended
(in thousands)                                                          Jun 26, 2022       Jun 27, 2021
Net cash provided by operating activities                           $      53,102        $      47,362
Net cash used in investing activities                                      (1,116)              (4,287)
Net cash used in financing activities                                     (64,682)              (2,336)

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

                                                              (494)                 319
Net change in cash, cash equivalents and restricted cash            $     

(13,190) $41,058

Cash flows from operating activities

Cash provided by operating activities consists of net income adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.


Demand for our contingent staffing services is generally higher during the
fiscal fourth quarter due to the holiday season surge. This generally results in
a deleveraging of accounts receivable and accounts payable after year-end. Also,
accrued wages and benefits can fluctuate based on whether the period end
requires the accrual of one or two weeks of payroll, the amount and timing of
bonus payments, and timing of payroll tax payments.

Net cash provided by accounts receivable collections through deleveraging was
partially offset by a slight increase in our days sales outstanding during the
twenty-six weeks ended June 26, 2022, primarily due to our sales mix trending
towards clients and segments with longer payment terms. Net cash used for
payments on accounts payable and accrued expenses was partially offset by more
favorable payment terms negotiated with our vendors as part of our focus on
capital management. Additionally, net cash used for payments for accrued wages
and benefits was primarily due to the timing and amount of annual bonus payments
to employees, which are paid in the fiscal first quarter.

Cash flows from investing activities

Investing cash flows consist of capital expenditures and purchases, sales and maturities of restricted investments, which are managed in line with our workers’ compensation collateral funding requirements and timing of claim payments.


Capital expenditures for the twenty-six weeks ended June 26, 2022 were lower
than the twenty-six weeks ended June 27, 2021 due to build-out costs of
$6.4 million incurred related to our Chicago support center, which was completed
during fiscal 2021.

Cash flows from financing activities


Financing cash flows consist primarily of repurchases of common stock as part of
our publicly announced share repurchase program, amounts to satisfy employee tax
withholding obligations upon the vesting of restricted stock, the net change in
our Revolving Credit Facility, and proceeds from the sale of common stock
through our employee stock purchase plans.

Net cash used in financing activities during the twenty-six weeks ended June 26,
2022 was primarily due to the repurchase of $60.9 million of our common stock in
the open market. As of June 26, 2022, $89.1 million remains available for
repurchase under existing authorizations.

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations; Summary of Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021.

Goodwill and indefinite-lived intangible assets


We evaluate goodwill and indefinite-lived intangible assets for impairment on an
annual basis as of the first day of our fiscal second quarter, or whenever
events or circumstances make it more likely than not that an impairment may have
occurred. These events or circumstances could include a significant change in
general economic conditions, deterioration in industry


                                   Page - 24

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




environment, changes in cost factors, declining operating performance
indicators, legal factors, competition, client engagement, changes in the
carrying amount of net assets, sale or disposition of a significant portion of a
reporting unit, or a sustained decrease in share price. We monitor the existence
of potential impairment indicators throughout the fiscal year.

Goodwill


We test for goodwill impairment at the reporting unit level. We consider our
operating segments to be our reporting units for goodwill impairment testing.
Our operating segments with remaining goodwill are PeopleReady, PeopleManagement
Centerline, PeopleScout RPO and PeopleScout MSP.

When evaluating goodwill for impairment, we may first assess qualitative factors
to determine whether it is more likely than not the fair value of a reporting
unit is less than its carrying amount. Qualitative factors include macroeconomic
conditions, industry and market conditions and overall company financial
performance. If, after assessing the totality of events and circumstances, we
determine that it is more likely than not the fair value of the reporting unit
is greater than its carrying amount, the quantitative impairment test is
unnecessary.

The quantitative impairment test, if necessary, involves comparing the fair
value of each reporting unit to its carrying value, including goodwill. Fair
value reflects the price a market participant would be willing to pay in a
potential sale of the reporting unit. If the fair value exceeds the carrying
value, we conclude that no goodwill impairment has occurred. If the carrying
value of the reporting unit exceeds its fair value, we recognize an impairment
loss in an amount equal to the excess, not to exceed the carrying value of the
goodwill. We consider a reporting unit's fair value to be substantially in
excess of its carrying value at a 20% premium or greater.

Determining the fair value of a reporting unit when performing a quantitative
impairment test involves the use of significant estimates and assumptions to
evaluate the impact of operational and macroeconomic changes on each reporting
unit. We estimate the fair value of each reporting unit using a weighted average
of the income and market valuation approaches. The income approach applies a
fair value methodology to each reporting unit based on discounted cash flows.
This analysis requires significant estimates and judgments, including estimation
of future cash flows, which is dependent on internal forecasts, estimation of
the long-term rate of growth for our business, estimation of the useful life
over which cash flows will occur, and determination of our weighted average cost
of capital, which is risk-adjusted to reflect the specific risk profile of the
reporting unit being tested. We also apply a market approach, which compares
TrueBlue, Inc. to comparable publicly traded companies and develops a
correlation, referred to as a multiple, to apply to the operating results of the
reporting units. The primary market multiples to which we compare are revenue
and earnings before interest, taxes, depreciation, and amortization.

We base fair value estimates on assumptions we believe to be reasonable but that
are unpredictable and inherently uncertain. Actual future results may differ
from those estimates. We confirm the reasonableness of the valuation conclusions
by comparing the indicated values of all the reporting units to the overall
company value indicated by the stock price and outstanding shares as of the
valuation date, or market capitalization.

We performed our annual goodwill impairment test as of the first day of our
fiscal second quarter of 2022. Based on our assessment of qualitative factors,
we concluded it was more likely than not that the fair value of each reporting
unit exceeded its carrying value, and the goodwill associated with each
reporting unit was not impaired. As such, it was not necessary to perform a
quantitative impairment analysis. Accordingly, no impairment loss was recognized
for the twenty-six weeks ended June 26, 2022.

Indefinite-lived intangible assets


We have indefinite-lived intangible assets related to our Staff Management and
PeopleScout trade names. We evaluate our indefinite-lived intangible assets for
impairment on an annual basis as of the first day of our fiscal second quarter,
or whenever events or circumstances make it more likely than not that an
impairment may have occurred. These events or circumstances could include
significant change in general economic conditions, deterioration in industry
environment, changes in cost factors, declining operating performance
indicators, legal factors, competition, client engagement, or sale or
disposition of a significant portion of the business. We monitor the existence
of potential impairment indicators throughout the fiscal year.

When evaluating indefinite-lived intangible assets for impairment, we may first
assess qualitative factors to determine whether it is more likely than not the
fair value of the indefinite-lived intangible is less than its carrying amount.
Qualitative factors include macroeconomic conditions, industry and market
conditions and overall company financial performance If, after assessing the
totality of events and circumstances, we determine that it is more likely than
not the fair value of the indefinite-lived intangible is greater than its
carrying amount, the quantitative impairment test is unnecessary.


                                   Page - 25

————————————————– ——————————

  Table of Contents

                      MANAGEMENT'S DISCUSSION AND ANALYSIS




The quantitative impairment test, if necessary, utilizes the relief from royalty
method to determine the fair value of each of our trade names. If the carrying
value exceeds the fair value, we recognize an impairment loss in an amount equal
to the excess, not to exceed the carrying value. Management uses considerable
judgment to determine key assumptions, including projected revenue, royalty
rates and appropriate discount rates.

We performed our annual impairment test for 2022 as of the first day of our
fiscal second quarter. Based on our assessment of qualitative factors, we
concluded it was more likely than not that the fair value of our
indefinite-lived intangible assets exceeded their carrying value and were not
impaired. As such, it was not necessary to perform a quantitative impairment
analysis. Accordingly, no impairment loss was recognized for the twenty-six
weeks ended June 26, 2022.

NEW ACCOUNTING STANDARDS

See Note 1: Summary of Significant Accounting Policies, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q.

© Edgar Online, source glimpses

.

Leave a Reply

Your email address will not be published.