# TrueBlue, Inc.: Form 10-Q for the period ended Mar 26, 2023

- Company: [TrueBlue, Inc.](/companies/tbi.md) (CIK 768899)
- Form: 10-Q
- Filed: 2023-04-24
- Accepted by EDGAR: Apr 24, 2023, 16:12 ET
- Period: 2023-03-26
- Accession: 0000768899-23-000084
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/768899/000076889923000084/tbi-20230326.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/768899/000076889923000084/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-26.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-12-26 to 2023-03-26 | $465.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2022-12-26 to 2023-03-26 | $342.2m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-12-26 to 2023-03-26 | $123.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-12-26 to 2023-03-26 | $122.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-12-26 to 2023-03-26 | −$5.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-12-26 to 2023-03-26 | −$640.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-12-26 to 2023-03-26 | −$4.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-12-26 to 2023-03-26 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-12-26 to 2023-03-26 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-12-26 to 2023-03-26 | 32,292,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-12-26 to 2023-03-26 | $9.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-12-26 to 2023-03-26 | $8.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2022-12-26 to 2023-03-26 | $24.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-26 | $47.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-26 | $371.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-26 | $957.1m | us-gaap:Assets |
| Current liabilities | at 2023-03-26 | $214.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-26 | $489.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-26 | $467.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,089 characters.

### 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, 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 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 and grow market share in these highly fragmented industries, we are committed to executing our digital strategies to increase our ability to attract and retain clients, employees and associates and reduce the cost of delivering our services. We have implemented these core strategies for each of our business segments: PeopleReady, PeopleScout and PeopleManagement.

### PeopleReady

PeopleReady provides clients with access to qualified associates through a wide range of staffing solutions for on-demand, contingent general and skilled labor. Our services range from providing one associate to hundreds, and are generally short-term in nature as they are filling the contingent staffing needs of our clients. 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 digital 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. Our primary focus at PeopleReady is the use of digitalization to supplement our nationwide footprint, improve our operating efficiency and effectiveness, and gain market share.

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### PeopleScout

PeopleScout offers recruitment process outsourcing (“RPO”), managed service provider (“MSP”) solutions and talent advisory services to a wide variety of industries, primarily in the U.S., Canada, the United Kingdom and Australia. Our RPO solutions are multi-year in duration, highly scalable and provide clients the support they need as their hiring volumes fluctuate. We tailor our services based on individual client needs, including sourcing, screening, hiring and onboarding, as well as employer branding and recruitment marketing, to improve the candidate experience and regulatory compliance, and ultimately lower our clients’ recruiting costs. Our proprietary technology platform (AffinixTM) uses artificial intelligence and machine learning to rapidly source a qualified talent pool within minutes rather than days, and further engages candidates through a seamless digital experience. 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 leveraging our strong brand reputation, continuing to invest in our sales team, and using our proprietary technology platform (Affinix) to continue to gain market share in high growth sectors.

### PeopleManagement

PeopleManagement provides recruitment and on-site management of a facility’s contingent industrial workforce throughout the U.S., Canada and Puerto Rico. Our client engagements are generally multi-location and multi-year, and include scalable recruiting, screening, hiring and management of the contingent workforce. Once operational, we deploy dedicated management and service teams that work side-by-side with a client’s full-time workforce. Our teams are an integral part of the production and logistics process, and specialize in labor-intensive manufacturing, warehousing and distribution. PeopleManagement also provides dedicated and contingent commercial 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.

### Fiscal first quarter of 2023 highlights

Total company revenue declined 15.6% to $465.3 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleReady revenue declined 17.4%, primarily due to the absence of the post-pandemic demand surge we benefited from in the prior period. PeopleScout revenue declined 15.3%, as clients responded to economic uncertainty by reducing hiring volumes. PeopleManagement revenue declined 12.6%, as clients responded to economic uncertainty by shifting otherwise outsourced work to their permanent workforce.

Total company gross profit as a percentage of revenue for the thirteen weeks ended March 26, 2023 increased by 110 basis points to 26.5%, compared to 25.4% for the same period in the prior year. This increase was primarily driven by lower workers’ compensation costs and higher bill rates within our PeopleReady segment, which have increased ahead of pay rates.

Total company selling, general and administrative (“SG&A”) expense increased 1.7% to $122.6 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The increase in SG&A expense was primarily related to workforce reduction costs within our PeopleScout and PeopleManagement segments at the end of the fiscal quarter, as well as investments we are making within our PeopleReady segment related to sales team training and geographical expansion of our skilled trades business.

The items above resulted in net loss of $4.3 million for the thirteen weeks ended March 26, 2023, compared to net income of $10.5 million for the same period in the prior year.

As of March 26, 2023, we were in a strong financial position with cash and cash equivalents of $47.2 million, no outstanding debt, and $292.8 million available under our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $340.0 million.

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### RESULTS OF OPERATIONS

### Total company results

The following table presents selected financial data:

*(in thousands, except percentages and per share data)*

|  | Thirteen weeks ended Mar 26, 2023 | % of revenue | Mar 27, 2022 | % of revenue |
| --- | ---: | ---: | ---: | ---: |
| Revenue from services | $465,288 |  | $551,515 |  |
| Gross profit | $123,113 | 26.5% | $139,845 | 25.4% |
| Selling, general and administrative expense | 122,645 | 26.4 | 120,568 | 21.9 |
| Depreciation and amortization | 6,411 | 1.4 | 7,287 | 1.3 |
| Income (loss) from operations | (5,943) | (1.3)% | 11,990 | 2.2% |
| Interest expense and other income, net | 1,014 |  | 505 |  |
| Income (loss) before tax expense (benefit) | (4,929) |  | 12,495 |  |
| Income tax expense (benefit) | (640) |  | 1,976 |  |
| Net income (loss) | $(4,289) | (0.9)% | $10,519 | 1.9% |
| Net income (loss) per diluted share | $(0.13) |  | $0.30 |  |

### Revenue from services

*(in thousands, except percentages)*

| Revenue from services: | Thirteen weeks ended Mar 26, 2023 | Growth (decline) % | Segment % of total | Mar 27, 2022 | Segment % of total |
| --- | ---: | ---: | ---: | ---: | ---: |
| PeopleReady | $252,628 | (17.4)% | 54.3% | $305,690 | 55.4% |
| PeopleScout | 69,476 | (15.3)% | 14.9 | 82,006 | 14.9 |
| PeopleManagement | 143,184 | (12.6)% | 30.8 | 163,819 | 29.7 |
| Total company | $465,288 | (15.6)% | 100.0% | $551,515 | 100.0% |

Total company revenue declined 15.6% to $465.3 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The decline was driven by economic uncertainty, as well as the absence of the post-pandemic demand surge we benefited from within our PeopleReady business in the prior year. In addition, clients have responded to macroeconomic uncertainty by reducing hiring volumes within our PeopleScout business and through higher utilization of their permanent workforce for previously outsourced work within our PeopleManagement business.

### PeopleReady

PeopleReady revenue declined 17.4% to $252.6 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. The decline in revenue was primarily due to the absence of the demand surge we benefited from in the prior year, as the post-pandemic recovery effort peaked and fueled our client’s need for contingent labor. During the last half of fiscal 2022, demand for our services slowed as clients faced economic uncertainty and paused the use of variable labor to supplement their core workforce. However, sequential weekly revenue trends for the thirteen weeks ended March 26, 2023 were consistent with historical patterns.

### PeopleScout

PeopleScout revenue declined 15.3% to $69.5 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleScout revenue declined as clients responded to economic uncertainty by reducing hiring volumes. In the prior year, PeopleScout benefited from increased customer volume, primarily in the travel and leisure and retail industries.

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### PeopleManagement

PeopleManagement revenue declined 12.6% to $143.2 million for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. PeopleManagement revenue declined as clients responded to economic uncertainty by reducing volumes in our on-site business, primarily among retail clients, as well as commercial driving services.

### Gross profit

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Gross profit | $123,113 | $139,845 |
| Percentage of revenue | 26.5% | 25.4% |

Gross profit as a percentage of revenue grew 110 basis points to 26.5% for the thirteen weeks ended March 26, 2023, compared to 25.4% for the same period in the prior year. Within our staffing businesses, lower workers’ compensation costs from favorable development of prior year reserves contributed 100 basis points of expansion. An additional 20 basis points of expansion was a result of higher bill rates in our staffing businesses, which have increased ahead of pay rates. This expansion was partially offset by a contraction of 10 basis points, due to an unfavorable revenue shift toward our lower margin staffing businesses.

### SG&A expense

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Selling, general and administrative expense | $122,645 | $120,568 |
| Percentage of revenue | 26.4% | 21.9% |

Total company SG&A expense increased by $2.1 million or 1.7% for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. We incurred $1.0 million in workforce reduction costs at the end of the fiscal quarter, primarily within our PeopleScout business, which are expected to generate cost savings for the remainder of fiscal 2023. Additionally, SG&A expense increased as a result of investments we have made within our PeopleReady segment, primarily in training for our sales team, as well as hiring additional account managers to broaden the geographical footprint of our skilled trades business.

### Depreciation and amortization

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Depreciation and amortization | $6,411 | $7,287 |
| Percentage of revenue | 1.4% | 1.3% |

Depreciation and amortization decreased for the thirteen weeks ended March 26, 2023 compared to the same period in the prior year, due to certain assets becoming fully depreciated or amortized during 2022.

### Income tax expense

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Income tax expense (benefit) | $(640) | $1,976 |
| Effective income tax rate | 13.0% | 15.8% |

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.

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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 (Loss) are as follows:

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023% |  | Mar 27, 2022% |  |
| --- | ---: | ---: | ---: | ---: |
| Income (loss) before tax expense (benefit) | $(4,929) |  | $12,495 |  |
| Federal income tax expense (benefit) at statutory rate | $(1,035) | 21.0% | $2,624 | 21.0% |
| Increase (decrease) resulting from: |  |  |  |  |
| State income taxes, net of federal benefit | (223) | 4.5 | 474 | 3.8 |
| Hiring tax credits, net | 765 | (15.5) | (1,142) | (9.1) |
| Non-deductible and non-taxable items | (204) | 4.1 | 263 | 2.1 |
| Stock-based compensation | 197 | (4.0) | (619) | (5.0) |
| Other, net | (140) | 2.9 | 376 | 3.0 |
| Income tax expense (benefit) | $(640) | 13.0% | $1,976 | 15.8% |

For the thirteen weeks ended March 26, 2023, we received an income tax benefit of $(0.6) million and had an effective tax rate of 13.0%, compared to income tax expense of $2.0 million and an effective tax rate of 15.8% for the same period in the prior year.

The difference between the statutory federal income tax rate of 21.0% and our effective tax rate of 13.0% for the thirteen weeks ended March 26, 2023 was primarily due to the benefit of hiring tax credits, including the Work Opportunity Tax Credit (“WOTC”), and stock-based compensation, partially offset by state income taxes and non-deductible items.

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 tax 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 costs and benefits 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 (loss) to income (loss) before tax expense (benefit).

Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income (loss) on the Consolidated Statements of Operations and Comprehensive Income (Loss) 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:

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Revenue from services | $252,628 | $305,690 |
| Segment profit | $872 | $16,219 |
| Percentage of revenue | 0.3% | 5.3% |

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PeopleReady segment profit declined $15.3 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were primarily due to the decline in revenue and the associated impact from higher operating leverage, partially offset by lower workers’ compensation costs and higher bill rates, which have increased ahead of pay rates.

***PeopleScout*** segment performance was as follows:

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Revenue from services | $69,476 | $82,006 |
| Segment profit | $8,923 | $10,972 |
| Percentage of revenue | 12.8% | 13.4% |

PeopleScout segment profit declined $2.0 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were a result of the decline in revenue, combined with the relatively fixed cost structure of the recruiting business. We took actions, in the form of workforce reductions, at the end of the fiscal quarter to reduce our fixed costs for the remainder of 2023.

***PeopleManagement*** segment performance was as follows:

*(in thousands, except percentages)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Revenue from services | $143,184 | $163,819 |
| Segment profit (loss) | $(202) | $2,979 |
| Percentage of revenue | (0.1)% | 1.8% |

PeopleManagement segment profit (loss) declined $3.2 million, and also declined as a percentage of revenue, for the thirteen weeks ended March 26, 2023, compared to the same period in the prior year. These declines were primarily due to the decline in revenue and the associated impact from higher operating leverage. We took actions during the fiscal first quarter to reduce costs for the remainder of 2023.

### FUTURE OUTLOOK

The following highlights represent our operating outlook. These expectations are subject to revision as our business changes with the overall economy.

### Operating outlook

- We expect revenue for the fiscal second quarter of 2023 to decline between 14% and 10% compared to the same period in the prior year, primarily due to clients’ response to macroeconomic uncertainty and the absence of the prior year demand surge. Higher revenue in the prior year within our PeopleReady segment was driven by a surge in retail project work and above average results in our existing client base as businesses found themselves in desperate need of labor during the peak of the post-pandemic recovery. The absence of this demand surge during the fiscal second quarter of 2023 is expected to account for approximately 4% of the total company revenue decline compared to the prior year.
- We anticipate gross margin contraction of between 60 and 20 basis points for the fiscal second quarter of 2023 compared to the same period in the prior year due to less contribution from PeopleScout, our highest margin segment. We anticipate gross margin to hold relatively steady for fiscal 2023, between a contraction of 20 and an expansion of 40 basis points, compared to the prior year.
- For the fiscal second quarter of 2023, we anticipate SG&A expense to be between $120 million and $124 million. For fiscal 2023, we anticipate SG&A expense to be between $495 million and $501 million. This includes approximately $1 million and $3 million in costs to upgrade our legacy PeopleReady technology for the fiscal second quarter and fiscal 2023, respectively. We will continue to exercise disciplined cost management while making investments in sales resources and digital strategies to drive profitable revenue growth.

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- During the first quarter of 2023, the PeopleScout and PeopleManagement teams reduced costs to ensure their respective operating structures were more in line with demand. These actions are expected to create $11 million of savings over the remainder of 2023. We expect to see approximately one quarter of the savings in cost of services with the remainder in SG&A.
- We expect diluted weighted average shares outstanding to be approximately 31 million for the fiscal second quarter of 2023.
- We expect our effective income tax rate for fiscal 2023 to be between 9% and 13%.
- Fiscal 2023 will include a 53rd week, which we expect will add between $22 million and $27 million in revenue, but is not expected to contribute significant net income due to it falling during a slow demand period between the Christmas and New Year holidays.

### Liquidity outlook

- Capital expenditures and spending for software as a service assets for the fiscal second quarter of 2023 are expected to be approximately $9 million, and between $36 million and $40 million for fiscal 2023. We remain committed to technological innovation to transform our business for a digital future.

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### 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 March 26, 2023, we had $47.2 million in cash and cash equivalents. We also had $292.8 million available under our $300.0 million Revolving Credit Facility, as $7.2 million was utilized by outstanding standby letters of credit. We have an option to increase the total line of credit amount from $300.0 million to $450.0 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 continue to make investments in online and mobile apps to increase the competitive differentiation of our services over the long term and improve the efficiency of our service delivery model. 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 minimize risk by diversifying 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 increased $0.6 million during the thirteen week period ended March 26, 2023 primarily due to the timing of collateral contributions as required by 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 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.

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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:

*(in thousands)*

|  | Thirteen weeks ended Mar 26, 2023 | Mar 27, 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $9,151 | $26,442 |
| Net cash (used in) provided by investing activities | (8,376) | 255 |
| Net cash used in financing activities | (26,825) | (36,049) |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 9 | (57) |
| Net change in cash, cash equivalents and restricted cash | $(26,041) | $(9,409) |

### Cash flows from operating activities

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

Demand for our services is generally lower during the fiscal first quarter, due in part to limitations in outside work during the winter months and slowdowns in manufacturing and logistics after the fiscal fourth quarter holiday season. This results in a deleveraging of accounts receivable and accounts payable compared to the prior year-end. 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 during the thirteen weeks ended March 26, 2023 was partially offset by an increase in days sales outstanding primarily due to a higher percentage of receivables with longer payment terms. Cash provided by accounts receivable was further offset by net cash used for payments on accounts payable and accrued expenses. Net cash used for payments on 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. In addition, our workers’ compensation claims reserve for estimated claims decreases as contingent labor services decline, as was the case in the current year.

### 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 thirteen weeks ended March 26, 2023 were higher than the thirteen weeks ended March 27, 2022 due in part to the continued investments we are making to upgrade our PeopleReady technology platform. For the thirteen weeks ended March 26, 2023, cash used for purchases of restricted investments were mostly offset by maturities. In the prior period, cash provided by maturities of restricted investments was not immediately reinvested by the Trust, and more than offset capital expenditures.

### 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 thirteen weeks ended March 26, 2023 was primarily due to the repurchase of $24.7 million of our common stock in the open market. As of March 26, 2023, $64.3 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 25, 2022.

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### 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.

## Market risk

As filed, 270 characters.

Our quantitative and qualitative disclosures about market risk are discussed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2022, and have not changed materially.

## Controls and procedures

As filed, 1,821 characters.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Security and Exchange Commission’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

During the fiscal first quarter of 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures at a reasonable assurance level, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level, as of March 26, 2023.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

The certifications required by Rule 13a-14 of the Exchange Act are filed as exhibits 31.1 and 31.2, respectively, to this Quarterly Report on Form 10-Q.

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## Risk factors

As filed, 193 characters.

There have been no material changes in the Company's risk factors previously disclosed in Part I, Item 1A of the Company's Annual Report filed on Form 10-K for the year ended December 25, 2022.

Filed Apr 24, 2023.
Source: SEC EDGAR, the filing index for accession 0000768899-23-000084. Last ingested by Listed: Nov 4, 2026, 18:22 ET. No prices; not investment advice.