Q4 2019 Earnings
February 2020
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,
- 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 Forms10-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 presentation 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. Any comparisons made herein to other periods are based on a comparison to the same period in the prior year unless otherwise stated.
2
Results and strategy overview
Q4 2019
FY 2019
Managing costs in-line
with revenue
- Total revenue-9% v. outlook of -10% to -6%
- Operating expense results were better than expected
- EPSin-line with company outlook: $0.23 v. outlook of $0.18 to $0.28
- Adjusted EPS1in-line with company outlook: $0.39 v. outlook of $0.35 to $0.45
- Total revenue-5% v. flat in 2018
- Revenue trends slowed over the course of the year as clients moderated contingent labor spend
- Total SG&A-5% v. prior year
- Disciplined approach to cost management while investing for growth
Progress on digital
strategy
- 875,000 shifts were filled via JobStack in Q4 2019, down from 877,000 in Q4 2018
- Digital fill rate2of 46% in Q4 2019, up from 41% in Q4 2018
- 87% worker adoption, up from 80% in Q4 2018
- Approximately 4 million shifts filled in 2019, or a job every nine seconds
- Ended the year with 21,300 clients using JobStack, up more than 50% from just one year ago
- PeopleScout's Affinix is helping clients improve time to fill, candidate flow and candidate satisfaction
Returning capital to shareholders
- $8 million of stock repurchased in Q4 2019
- $119 million remaining under existing authorizations
- Strong balance sheet: 6% debt to capital ratio and ample liquidity
- $39 million of stock repurchased in 2019
- Over the last three years(2017-2019), $110 million of capital returned to shareholders via share repurchases
- See the appendix to this presentation and "Financial Information" in the investors section of our website at www.trueblue.com for a definition and full reconciliation ofnon-GAAP financial measures to GAAP financial results.
2Represents orders filled via JobStack v. all filled orders for Q4 2019 (calculation excludes unfilled orders). | 3 |
Financial summary
Amounts in millions, except per share data | Q4 2019 | Change | FY 2019 | Change |
Revenue | $591 | -9% | $2,369 | -5% |
Net Income | $8.7 | -41% | $63.1 | -4% |
Net Income Per Diluted Share | $0.23 | -38% | $1.61 | -1% |
Adjusted Net Income¹ | $14.8 | -39% | $80.3 | -13% |
Adj. Net Income Per Diluted Share | $0.39 | -36% | $2.05 | -10% |
Adjusted EBITDA¹ | $21.0 | -36% | $110.7 | -14% |
Adjusted EBITDA Margin | 3.5% | -150 bps | 4.7% | -50 bps |
Q4 2019 profitability decrease attributable to less revenue, prior year payroll tax benefits and previously disclosed headwinds.2
- See the appendix to this presentation and "Financial Information" in the investors section of our website at www.trueblue.com for a definition and full reconciliation ofnon-GAAP financial measures to GAAP financial results.
- PeopleScout headwind from one client lost after being acquired and less volume / lower margins on another large account. The first client had no order volume starting in Q2 2019 and the second client had no order volume in Q4
2019. For Q4 2019, these clients represented a -13% combined Adjusted EBITDA growth headwind. | 4 |
Gross margin and SG&A bridges
Gross Margin
26.5%
25.4%
-0.6%
-0.5%
Q4 2018 | Staffing | RPO | Q4 2019 |
SG&A
Amounts in millions
$145 | $134 |
-$1-$10
Q4 2018 | Adjusted EBITDA | Core business | Q4 2019 |
exclusions¹ |
- Adjusted EBITDA further excludes from EBITDA Work Opportunity Tax Creditthird-party processing fees, acquisition/integration costs and other costs. See the appendix to this presentation and "Financial Information" in the investors
section of our website at www.trueblue.com for a definition and full reconciliation of non-GAAP financial measures to GAAP financial results. | 5 |
Q4 2019 results by segment
Amounts in millions | PeopleReady | PeopleManagement | PeopleScout |
Revenue | $365 | $171 | $55 |
% Growth | -9% | -7% | -18% |
Segment Profit1 | $18 | $3 | $5 |
% Growth | -19% | -45% | -54% |
% Margin | 4.9% | 1.6% | 9.8% |
Change | -60 bps | -110 bps | -770 bps |
Notes: | ¬Revenue was -9% v. -4% last | ¬Revenue was -7% v. -12% last | ¬Revenue was -18% v. -9% last |
quarter | quarter; improvement due to | quarter | |
¬Declines were broad-based | run-off of previously disclosed | ¬Decline in revenue and | |
across multiple geographies | revenue headwinds2 | profitability primarily from | |
and industries | ¬Profitability impacted by | previously disclosed | |
¬Revenue -15% in Dec., or -7% | shorter peak holiday season | headwinds3and softness in | |
after adjustment for the | ¬The dollar volume of new | our UK business due to | |
Thanksgiving holiday shift | business wins remains | uncertainty associated with the | |
encouraging (up 21% for FY | Brexit vote | ||
2019) | |||
- 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.
- PeopleManagement revenue headwinds from loss of Amazon Canadian business and volume / price reductions at another retail client. Total revenue growth headwind was negligible in Q4 2019 v.-5% in Q3 2019.
- PeopleScout headwind from one client lost after being acquired and less volume / lower margins on another large account. The first client had no order volume starting in Q2 2019 and the second client had no order volume in Q4 2019(-11% combined revenue growth headwind in Q4 2019 v. -9% in Q3 2019). Associated segment profit headwind of approximately $4M (-37% combined segment profit growth headwind in Q4 2019).
6
2019 headwind information
Amounts in millions | nPeopleScout Clients¹ | ||||
nRetail Client (PeopleManagement) | |||||
$26 | nAmazon (PeopleManagement) | ||||
Headwinds | 5 | nPlaneTechs (PeopleManagement) | $64 | ||
$16 | 18 | ||||
$15 | |||||
12 | |||||
3 | 6 | 15 | |||
Revenue | |||||
6 | 3 | $8 | 24 | ||
8 | 6 | 6 | 8 | 8 | |
Q1-19 | Q2-19 | Q3-19 | Q4-19 | FY 2019 | |
Headwinds | $6 | ||||
$5 | $18 | ||||
1 | $4 | $4 | |||
4 | |||||
12 | |||||
Profit | |||||
2 | 2 | ||||
4 | |||||
Segment | 1 | 1 | |||
4 | |||||
2 | |||||
1 | 1 | 3 | |||
Q1-19 | Q2-19 | Q3-19 | Q4-19 | FY 2019 | |
Note: Figures may not sum to consolidated totals due to rounding. Please see the outlook section of our Q4 2018 earnings presentation for additional background information.
1PeopleScout headwind from one client lost after being acquired and less volume / lower margins on another large account. The first client had no order volume starting in Q2 2019 and the second client had no7order volume in Q4 2019.
Leading our business into a digital future
JobStackTM
Industry-leading mobile app that connects our | Industry-leading platform for sourcing, screening | |
associates with jobs and simplifies client ordering | and delivering a permanent workforce | |
Year | Achievements | Digital Fills1 | Client Users |
2017 | Successful branch | 22% | 1,600 |
roll-out | |||
2018 | Launch of client | 41% | 13,100 |
application | |||
2019 | Drive revenue | ||
growth with heavy | 46% | 21,300 | |
client users | |||
2020 | Drive candidate | 55% | 28,000 |
Goal | flow | ||
Before | After | |
¬30% applicant | ¬80%+ applicant | |
conversion rate2 | conversion rate | |
¬Not mobile enabled | ¬50% of candidates | |
apply with mobile | ||
¬Limited passive | ¬40 candidates | |
sourcing | sourced per job | |
¬>35 days to fill | ¬25 days to fill | |
http://www.peopleready.com/jobstack/ | https://www.peoplescout.com/affinix/ |
- Represents orders filled via JobStack v. all filled orders for Q4 of the given year (calculation excludes unfilled orders).
Note: Figures represent average initial improvements experienced across a small portion of our client base that has been fully implemented on Affinix | 8 |
and tracks relevant statistics.
2Applicant conversion rate represents the number of completed applications over the number of applications initiated.
Strong balance sheet and return of capital
Total Debt | Debt to Total Capital1 |
Amounts in millions
Net Debt | Cash |
$138 | $119 | ||
$35 | |||
$29 | $80 | ||
$37 | |||
$103 | $90 | $47 | |
$33 | $38 | ||
2016 | 2017 | 2018 | 2019 |
Liquidity |
21% | 18% | ||
12% | |||
6% | |||
2016 | 2017 | 2018 | 2019 |
Share Repurchase % of Free Cash Flow2
Amounts in millions
Borrowing Availability | Cash | ||
$260 | $295 | ||
$38 | |||
$47 | |||
$171 | |||
$146 | |||
$35 | $257 | ||
$29 | $213 | ||
$136 | |||
$117 | |||
2016 | 2017 | 2018 | 2019 |
47% | 59% | ||
32% | |||
2% | |||
2016 | 2017 | 2018 | 2019 |
Note: Figures may not sum to consolidated totals due to rounding. Balances as of fiscal period end. | ||
1 | Calculated as total debt divided by the sum of total debt plus shareholders' equity. | |
2 | Free cash flow calculated as net cash provided by operating activities less capital expenditures. See the appendix to this presentation and "Financial Information" in the Investors section of our website at | 9 |
www.trueblue.com for a definition and full reconciliation of non-GAAP financial measures to GAAP financial results.
Outlook
Q1 outlook
Amounts in millions, except per share data | ||
Outlook | Notes | |
Revenue: Total TrueBlue¹ | $503 to $528 | •Incremental improvement v. Q4 2019 based on recent trends |
-9% to -4% growth | ||
Revenue: PeopleReady | $303 to $314 | •Incremental improvement v. Q4 2019 based on recent trends |
-7% to -4% growth | ||
Revenue: PeopleManagement | $149 to $158 | •Incremental improvement v. Q4 2019 based on new clients wins ramping on |
-5% to 0% growth | ||
Revenue: PeopleScout | $50 to $55 | •See detail on client headwinds below ($5M revenue impact, or 8% growth impact) |
-26% to -18% growth | ||
Net loss per basic share | $0.07 to $0.00 | •Assumes an effective income tax rate of 12% |
•Assumes basic weighted average shares outstanding of 37.8M and diluted | ||
Adjusted net income per diluted share | $0.04 to $0.11 | |
weighted average shares outstanding of 38.4M | ||
Select 2020 outlook information
Q1 | Q2 | Q3 | Q4 | ||
•2020 capex in-line with historical run rate with the exception of $10M in | |||||
Capital Expenditures | $5 | $7 | $12 | $13 | capex related to our Chicago headquarters. The lessor will subsidize the |
majority of the build-out, with offsetting cash flow expected in 2021. No | |||||
material change to depreciation anticipated. |
PeopleScout Client Headwinds | Q1 | Q2 | Q3 | Q4 | |
Revenue Headwind | -$5 | -$4 | -$2 | $0 | •As previously disclosed, PeopleScout headwind from one client lost |
after being acquired and less volume / lower margins on another large | |||||
Segment Profit Headwind | -$3 | -$2 | -$1 | $0 | account. The first client had no order volume starting in Q2 2019 and |
the second client had no order volume in Q4 2019. | |||||
11
- Figures may not sum to consolidated totals due to rounding.
Appendix
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 thesenon-GAAPfinancial 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 | Definition | Purpose of Adjusted Measures |
Measure | ||
EBITDA and | EBITDA excludes from net income: | - Enhances comparability on a consistent basis and provides |
Adjusted EBITDA | - interest and other income (expense), net, | investors with useful insight into the underlying trends of the |
- income taxes, and | business. | |
- depreciation and amortization. | - Used by management to assess performance and | |
Adjusted EBITDA, further excludes: | ||
effectiveness of our business strategies. | ||
- Work Opportunity Tax Credit third-party processing fees, | - Provides a measure, among others, used in the | |
- acquisition/integration costs | ||
- gain on deferred compensation assets, and | determination of incentive compensation for management. | |
- other adjustments. | ||
Adjusted net | Net income and net income per diluted share, excluding: | - Enhances comparability on a consistent basis and provides |
income and | - amortization of intangibles of acquired businesses, | investors with useful insight into the underlying trends of the |
Adjusted net | - acquisition/integration costs, | business. |
income, per diluted | - gain on divestiture, | - Used by management to assess performance and |
share | - other adjustments, | |
- tax effect of each adjustment to U.S. GAAP net income, and | effectiveness of our business strategies. | |
- adjust income taxes to the expected effective tax rate. | ||
Free cash flow | Net cash provided by operating activities, minus cash purchases | - Used by management to assess cash flows. |
for property and equipment. |
13
1.RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME, PER DILUTED SHARE (Unaudited)
Q4 2019 | Q4 2018 | |||||
13 Weeks Ended | 13 Weeks Ended | |||||
(in thousands, except for per share data) | Dec 29, 2019 | Dec 30, 2018 | ||||
Net income (loss) | $ | 8,715 | $ | 14,887 | ||
Amortization of intangible assets of acquired businesses (2) | 4,003 | 5,162 | ||||
Acquisition/integration costs (3) | (50) | 989 | ||||
Other adjustments (4) | 3,913 | 4,333 | ||||
Tax effect of adjustments to net income (5) | (1,102) | (1,468) | ||||
Adjustment of income taxes to normalized effective rate (6) | (671) | 357 | ||||
Adjusted net income | $ | 14,808 | $ | 24,260 | ||
*Totals may not sum due to rounding | ||||||
Adjusted net income, per diluted share | $ | 0.39 | $ | 0.61 | ||
Basic weighted average shares outstanding | 37,843 | 39,528 | ||||
Diluted weighted average shares outstanding | 38,348 | 39,926 | ||||
2019 | ||||||
52 Weeks Ended | ||||||
(in thousands, except for per share data) | Dec 29, 2019 | |||||
Net income | $ | 63,073 | ||||
Gain on divestiture (1) | - | |||||
Amortization of intangible assets of acquired businesses (2) | 17,899 | |||||
Acquisition/integration costs (3) | 1,562 | |||||
Other adjustments (4) | 3,915 | |||||
Tax effect of adjustments to net income (5) | (3,273) | |||||
Adjustment of income taxes to normalized effective rate (6) | (2,835) | |||||
Adjusted net income | $ | 80,341 |
Q1 2020 Outlook*
13 Weeks Ended
Mar 29, 2020
$ | (2,500) - | $ | 100 | |
4,000 | ||||
- | ||||
600 | ||||
(600) | ||||
- | ||||
$ | 1,500 | - | $ | 4,000 |
$ | 0.04 | - | $ | 0.11 |
37,800 | ||||
38,400 | ||||
2018 | ||||
52 Weeks Ended | ||||
Dec 30, 2018 | ||||
$ | 65,754 | |||
(718) | ||||
20,750 | ||||
2,672 | ||||
10,317 | ||||
(5,074) | ||||
(1,843) | ||||
$ | 91,858 |
Adjusted net income, per diluted share | $ | 2.05 | $ | 2.28 |
Diluted weighted average shares outstanding | 39,179 | 40,275 |
See the last slide of the appendix for footnotes. | 14 |
2. RECONCILIATION OF U.S. GAAP NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA (Unaudited)
Q4 2019 | Q4 2018 | |||||
13 Weeks Ended | 13 Weeks Ended | |||||
(in thousands) | Dec 29, 2019 | Dec 30, 2018 | ||||
Net income (loss) | $ | 8,715 | $ | 14,887 | ||
Income tax expense | 638 | 2,839 | ||||
Interest and other (income) expense, net | (2,014) | (848) | ||||
Depreciation and amortization | 9,021 | 10,272 | ||||
EBITDA | 16,360 | 27,150 | ||||
Work Opportunity Tax Credit processing fees (7) | 240 | 285 | ||||
Acquisition/integration costs (3) | (50) | 989 | ||||
Gain on deferred compensation assets (8) | 495 | - | ||||
Other adjustments (4) | 3,913 | 4,333 | ||||
Adjusted EBITDA | $ | 20,958 | $ | 32,757 | ||
* Totals may not sum due to rounding | ||||||
2019 | ||||||
52 Weeks Ended | ||||||
(in thousands) | Dec 29, 2019 | |||||
Net income | $ | 63,073 | ||||
Income tax expense | 6,971 | |||||
Interest and other (income) expense, net | (3,865) | |||||
Depreciation and amortization | 37,549 | |||||
EBITDA | 103,728 | |||||
Work Opportunity Tax Credit processing fees (7) | 960 | |||||
Acquisition/integration costs (3) | 1,562 | |||||
Gain on deferred compensation assets (8) | 495 | |||||
Other adjustments (4) | 3,915 | |||||
Adjusted EBITDA | $ | 110,660 |
Q1 2020 Outlook*
13 Weeks Ended
Mar 29, 2020
$ | (2,500) | - | $ | 100 |
(300) | - | - | ||
(900) | ||||
9,000 | ||||
5,200 | - | 8,200 | ||
200 | ||||
- | ||||
- | ||||
600 | ||||
$ | 6,000 | - | $ | 9,000 |
2018
52 Weeks Ended
Dec 30, 2018
$65,754 9,909 (1,744) 41,049
114,968
985
2,672
-
10,317
$128,942
See the last slide of the appendix for footnotes. | 15 |
3.RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOWS (Unaudited)
2019 | 2018 | 2017 | 2016 | ||||||||
52 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | 53 Weeks Ended | ||||||||
(in thousands) | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Jan 1, 2017 | |||||||
Net cash provided by operating activities | $ | 94,542 | $ | 125,692 | $ | 100,134 | $ | 260,703 | |||
Capital expenditures | (28,119) | (17,054) | (21,958) | (29,042) | |||||||
Free cash flows | $ | 66,423 | $ | 108,638 | $ | 78,176 | $ | 231,661 |
Footnotes:
- Gain on the divestiture of our PlaneTechs business soldmid-March 2018.
- Amortization of intangible assets of acquired businesses.
- Acquisition/integration costs for the acquisition of TMP Holding LTD completed on June 12, 2018.
- Other adjustments for the 13 weeks and 52 weeks ended December 29, 2019 primarily include implementation costs forcloud-based systems of $0.6 million and $3.2 million, respectively, workforce reduction costs primarily associated with employee reductions in the PeopleReady business of $2.9 million and $3.3 million, respectively and amortization of software as a service assets of $0.5 million and $1.6 million, respectively, which is reported in selling, general and administrative expense. These other cost adjustments for the 52 weeks ended December 29, 2019 were slightly offset by $3.9 million of workers' compensation benefit related to additional insurance coverage associated with former workers' compensation carriers that are in liquidation. Other adjustments 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 adjustments for the 13 weeks ended March 29, 2020 include implementation costs for cloud-based systems of $0.3 million and amortization of software as a service assets of $0.3 million.
- Total tax effect of each of the adjustments to U.S. GAAP net income using the expected ongoing rate of 12 percent for 2020 and 14 percent for all other periods presented.
- Adjustment of the effective income tax rate to the expected ongoing rate of 12 percent for 2020 and 14 percent for all other periods presented.
- Thesethird-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.
- Gain realized on sale of deferred compensation mutual funds to purchase corporate owned life insurance policies during the 13 weeks ended December 29, 2019.
16
Attachments
- Original document
- Permalink
Disclaimer
TrueBlue Inc. published this content on 05 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 February 2020 23:16:03 UTC