UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June ~~27, 2021~~26, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-14543

____________________________________

TrueBlue, Inc.

(Exact name of registrant as specified in its charter)

______________________________________

Washington

91-1287341

(State of incorporation)

(I.R.S. employer identification no.)

1015 A Street, Tacoma, Washington 98402

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (253) 383-9101

______________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	TBI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~12, 2021,~~19, 2022, there were ~~35,503,472~~32,686,375 shares of the registrant’s common stock outstanding.

TrueBlue, Inc.

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated financial statements (unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~	4
	Consolidated Statements of Cash Flows	5
	Notes to consolidated financial statements	6
Item 2.	Management’s discussion and analysis of financial condition and results of operations	1416
Item 3.	Quantitative and qualitative disclosures about market risk	3026
Item 4.	Controls and procedures	3026

PART II. OTHER INFORMATION
Item 1.	Legal proceedings	3127
Item 1A.	Risk factors	3127
Item 2.	Unregistered sales of equity securities and use of proceeds	3835
Item 3.	Defaults upon senior securities	3935
Item 4.	Mine safety disclosures	3935
Item 5.	Other information	3935
Item 6.	Index to exhibits	3936

	Signatures	4037

Page - 2

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.			CONSOLIDATED FINANCIAL STATEMENTS

TRUEBLUE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands, except par value data)	(in thousands, except par value data)	June 27, 2021		December 27, 2020		(in thousands, except par value data)	June 26, 2022		December 26, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	105,234	$	62,507	Cash and cash equivalents	$	32,432	$	49,896
Accounts receivable, net of allowance of $3,843 and $2,921		292,731		278,343
Accounts receivable, net of allowance of $3,987 and $6,687						Accounts receivable, net of allowance of $3,987 and $6,687	338,800		353,882
Prepaid expenses and other current assets	Prepaid expenses and other current assets	24,439		26,137		Prepaid expenses and other current assets	22,224		31,614
Income tax receivable	Income tax receivable	10,121		11,898		Income tax receivable	12,878		9,681
Total current assets	Total current assets	432,525		378,885		Total current assets	406,334		445,073
Property and equipment, net	Property and equipment, net	82,079		71,734		Property and equipment, net	90,091		88,090
Restricted cash and investments	Restricted cash and investments	224,649		240,534		Restricted cash and investments	205,769		221,026
Deferred income taxes, net	Deferred income taxes, net	29,371		30,019		Deferred income taxes, net	27,262		29,330
Goodwill	Goodwill	94,950		94,873		Goodwill	93,995		94,538
Intangible assets, net	Intangible assets, net	25,324		28,929		Intangible assets, net	18,998		22,211
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	55,316		65,940		Operating lease right-of-use assets, net	52,923		55,197
Workers’ compensation claims receivable, net	Workers’ compensation claims receivable, net	57,194		52,934		Workers’ compensation claims receivable, net	78,645		61,386
Other assets, net	Other assets, net	16,660		16,729		Other assets, net	16,993		16,375
Total assets	Total assets	$	1,018,068	$	980,577	Total assets	$	991,010	$	1,033,226
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other accrued expenses	Accounts payable and other accrued expenses	$	52,116	$	58,447	Accounts payable and other accrued expenses	$	66,396	$	77,172
Accrued wages and benefits	Accrued wages and benefits	136,675		122,657		Accrued wages and benefits	85,543		100,173

Current portion of workers’ compensation claims reserve	Current portion of workers’ compensation claims reserve	60,032		66,007		Current portion of workers’ compensation claims reserve	56,024		61,596

Current operating lease liabilities	Current operating lease liabilities	12,344		13,938		Current operating lease liabilities	12,240		12,097
Other current liabilities	Other current liabilities	13,371		7,918		Other current liabilities	12,618		7,508
Total current liabilities	Total current liabilities	274,538		268,967		Total current liabilities	232,821		258,546
Workers’ compensation claims reserve, less current portion	Workers’ compensation claims reserve, less current portion	194,863		189,486		Workers’ compensation claims reserve, less current portion	211,574		194,598

Long-term deferred compensation liabilities	Long-term deferred compensation liabilities	27,408		26,361		Long-term deferred compensation liabilities	25,237		28,806
Long-term operating lease liabilities	Long-term operating lease liabilities	52,987		54,797		Long-term operating lease liabilities	52,543		54,927

Other long-term liabilities	Other long-term liabilities	3,042		3,776		Other long-term liabilities	2,882		3,282
Total liabilities	Total liabilities	552,838		543,387		Total liabilities	525,057		540,159

Commitments and contingencies (Note 6)		0
Commitments and contingencies (Note 7)						Commitments and contingencies (Note 7)	0

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, $0.131 par value, 20,000 shares authorized; NaN shares issued and outstanding		0		0
Common stock, no par value, 100,000 shares authorized; 35,510 and 35,493 shares issued and outstanding		1		1
Preferred stock, $0.131 par value, 20,000 shares authorized; No shares issued and outstanding						Preferred stock, $0.131 par value, 20,000 shares authorized; No shares issued and outstanding	—		—
Common stock, no par value, 100,000 shares authorized; 32,684 and 34,861 shares issued and outstanding						Common stock, no par value, 100,000 shares authorized; 32,684 and 34,861 shares issued and outstanding	1		1
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(14,338)		(14,828)		Accumulated other comprehensive loss	(17,344)		(15,747)
Retained earnings	Retained earnings	479,567		452,017		Retained earnings	483,296		508,813
Total shareholders’ equity	Total shareholders’ equity	465,230		437,190		Total shareholders’ equity	465,953		493,067
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	1,018,068	$	980,577	Total liabilities and shareholders’ equity	$	991,010	$	1,033,226

See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS)~~

(unaudited)


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended				Twenty-six weeks ended
(in thousands, except per share data)	(in thousands, except per share data)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(in thousands, except per share data)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenue from services	Revenue from services	$	515,955	$	358,944	$	974,661	$	853,196	Revenue from services	$	569,253	$	515,955	$	1,120,768	$	974,661
Cost of services	Cost of services	379,487		275,719		727,619		643,812		Cost of services	410,722		379,487		822,392		727,619
Gross profit	Gross profit	136,468		83,225		247,042		209,384		Gross profit	158,531		136,468		298,376		247,042
Selling, general and administrative expense	Selling, general and administrative expense	110,508		97,200		207,909		214,581		Selling, general and administrative expense	122,034		110,508		242,602		207,909
Depreciation and amortization	Depreciation and amortization	7,017		7,256		13,979		16,350		Depreciation and amortization	7,245		7,017		14,532		13,979
Goodwill and intangible asset impairment charge		0		0		0		175,189
Income (loss) from operations		18,943		(21,231)		25,154		(196,736)

Income from operations										Income from operations	29,252		18,943		41,242		25,154

Interest expense and other income, net	Interest expense and other income, net	724		(412)		1,299		(149)		Interest expense and other income, net	(110)		724		395		1,299
Income (loss) before tax expense (benefit)		19,667		(21,643)		26,453		(196,885)
Income tax expense (benefit)		3,783		(13,475)		3,671		(38,223)
Net income (loss)		$	15,884	$	(8,168)	$	22,782	$	(158,662)
Income before tax expense										Income before tax expense	29,142		19,667		41,637		26,453
Income tax expense										Income tax expense	5,129		3,783		7,105		3,671
Net income										Net income	$	24,013	$	15,884	$	34,532	$	22,782

Net income (loss) per common share:
Net income per common share:										Net income per common share:
Basic	Basic	$	0.46	$	(0.23)	$	0.66	$	(4.39)	Basic	$	0.73	$	0.46	$	1.04	$	0.66
Diluted	Diluted	$	0.45	$	(0.23)	$	0.65	$	(4.39)	Diluted	$	0.72	$	0.45	$	1.02	$	0.65

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	34,818		35,077		34,746		36,166		Basic	32,707		34,818		33,318		34,746
Diluted	Diluted	35,352		35,077		35,205		36,166		Diluted	33,149		35,352		33,832		35,205

Other comprehensive income (loss):
Other comprehensive income:										Other comprehensive income:
Foreign currency translation adjustment	Foreign currency translation adjustment	$	(6)	$	2,098	$	490	$	(4,527)	Foreign currency translation adjustment	$	(1,724)	$	(6)	$	(1,597)	$	490
Comprehensive income (loss)		$	15,878	$	(6,070)	$	23,272	$	(163,189)
Comprehensive income										Comprehensive income	$	22,289	$	15,878	$	32,935	$	23,272

See accompanying notes to consolidated financial statements

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TRUEBLUE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Twenty-six weeks ended
(in thousands) June 27,
2021 June 28,
2020
Cash flows from operating activities:
Net income (loss) $ 22,782 $ (158,662)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 13,979 16,350
Goodwill and intangible asset impairment charge 0 175,189
Provision for credit losses 2,094 5,923
Stock-based compensation 6,916 4,345
Deferred income taxes 652 (27,049)
Non-cash lease expense 7,853 7,454
Other operating activities (1,473) 2,669
Changes in operating assets and liabilities:
Accounts receivable (16,486) 111,803
Income tax receivable 1,103 (7,291)
Operating lease right-of-use asset 6,135 0
Other assets (2,495) 4,682
Accounts payable and other accrued expenses (6,952) (22,197)
Other accrued wages and benefits 11,208 (10,809)
Deferred employer payroll taxes 2,810 15,730
Workers’ compensation claims reserve (598) (5,668)
Operating lease liabilities (6,729) (7,643)
Other liabilities 6,563 (1,344)
Net cash provided by operating activities 47,362 103,482
Cash flows from investing activities:
Capital expenditures (19,868) (11,641)
Purchases of restricted available-for-sale investments (14) (1,739)
Sales of restricted available-for-sale investments 452 2,581
Purchases of restricted held-to-maturity investments 0 (11,458)
Maturities of restricted held-to-maturity investments 15,143 16,190
Net cash used in investing activities (4,287) (6,067)
Cash flows from financing activities:
Purchases and retirement of common stock 0 (52,346)
Net proceeds from employee stock purchase plans 538 536
Common stock repurchases for taxes upon vesting of restricted stock (2,686) (1,956)
Net change in revolving credit facility 0 7,900
Other (188) (1,344)
Net cash used in financing activities (2,336) (47,210)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 319 (736)
Net change in cash, cash equivalents and restricted cash 41,058 49,469
Cash, cash equivalents and restricted cash, beginning of period 118,612 92,371
Cash, cash equivalents and restricted cash, end of period $ 159,670 $ 141,840
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest $ 880 $ 2,402
Income taxes 1,943 (3,707)
Operating lease liabilities 8,335 8,841
Non-cash transactions:
Property and equipment purchased but not yet paid 1,968 1,189
Right-of-use assets obtained in exchange for new operating lease liabilities 3,162 4,841


	Twenty-six weeks ended
(in thousands)	June 26, 2022		June 27, 2021
Cash flows from operating activities:
Net income	$	34,532	$	22,782
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,532		13,979

Provision for credit losses	2,572		2,094
Stock-based compensation	4,487		6,916
Deferred income taxes	2,117		652
Non-cash lease expense	6,518		7,853
Other operating activities	6,752		(1,473)
Changes in operating assets and liabilities:
Accounts receivable	12,524		(16,486)
Income tax receivable	(3,549)		1,103
Operating lease right-of-use asset	—		6,135
Other assets	(8,486)		(2,495)
Accounts payable and other accrued expenses	(10,629)		(6,952)
Accrued wages and benefits	(14,638)		11,208
Deferred employer payroll taxes	—		2,810
Workers’ compensation claims reserve	11,404		(598)
Operating lease liabilities	(6,441)		(6,729)
Other liabilities	1,407		6,563
Net cash provided by operating activities	53,102		47,362
Cash flows from investing activities:
Capital expenditures	(13,992)		(19,868)




Purchases of restricted available-for-sale investments	—		(14)
Sales of restricted available-for-sale investments	—		452
Purchases of restricted held-to-maturity investments	(4,950)		—
Maturities of restricted held-to-maturity investments	17,826		15,143

Net cash used in investing activities	(1,116)		(4,287)
Cash flows from financing activities:
Purchases and retirement of common stock	(60,939)		—
Net proceeds from employee stock purchase plans	536		538
Common stock repurchases for taxes upon vesting of restricted stock	(4,132)		(2,686)



Other	(147)		(188)
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, cash equivalents and restricted cash, beginning of period	103,185		118,612
Cash, cash equivalents and restricted cash, end of period	$	89,995	$	159,670
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest	$	452	$	880
Income taxes	8,413		1,943
Operating lease liabilities	7,925		8,335
Non-cash transactions:
Property and equipment purchased but not yet paid	3,385		1,968
Right-of-use assets obtained in exchange for new operating lease liabilities	4,852		3,162

See accompanying notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial statement preparation

The accompanying unaudited consolidated financial statements (“financial statements”) of TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us,” and “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, certain information and footnote disclosures usually found in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial statements reflect all adjustments which, in the opinion of management, are necessary to fairly state the financial statements for the interim periods presented. We follow the same accounting policies for preparing both quarterly and annual financial statements.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The severity, magnitude and duration, as well as the economic consequences of the the coronavirus (“COVID-19”) pandemic, are uncertain and difficult to predict. Therefore, our accounting estimates and assumptions might change materially in future periods.

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020.~~26, 2021. The results of operations for the twenty-six weeks ended June ~~27, 2021~~26, 2022 are not necessarily indicative of the results expected for the full fiscal year nor for any other fiscal period.

~~Reclassifications~~

Certain previously reported immaterial prior year amounts have been reclassified within current liabilities on our Consolidated Balance Sheets to conform to current year presentation. Additionally, we have separately presented deferred employer payroll taxes from prior period reported amounts within operating activities on our Consolidated Statements of Cash Flows.

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, ~~and~~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 ~~the business climate, legal~~general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, orchanges in the carrying amount of net assets, sale or disposition of a significant portion of a reporting ~~unit.~~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, ~~On-Site,~~PeopleManagement Centerline, PeopleScout RPO and PeopleScout MSP. ~~The~~

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.

Determining the fair value of a reporting unit 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 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 identifies similar 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. The income and market approaches were equally weighted in our most recent annual impairment test. 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 consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)

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.

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 ~~2021 annual impairment test, all~~assessment of qualitative factors, we concluded it was more likely than not that the fair value of our ~~reporting units’ fair values~~indefinite-lived intangible assets exceeded their carrying value and were ~~substantially in excess of their respective carrying values.~~not impaired. As such, it was not necessary to perform a quantitative impairment analysis. Accordingly, ~~there was~~ no impairment loss was recognized ~~during~~for the twenty-six weeks ended June ~~27, 2021.~~26, 2022.

Recently adopted accounting standards

There were no new accounting ~~pronouncements~~standards adopted during the ~~period~~twenty-six weeks ended June 26, 2022 that had an impact on our financial statements.

Recently issued accounting ~~pronouncements~~standards not yet adopted

There are no accounting ~~pronouncements~~standards which have not yet been adopted that are expected to have a significant impact on our financial statements and related disclosures.

NOTE 2: FAIR VALUE MEASUREMENT

Assets measured at fair value on a recurring basis

Our assets measured at fair value on a recurring basis consisted of the following:


		June 27, 2021									June 26, 2022
(in thousands)	(in thousands)	Total fair value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		(in thousands)	Total fair value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Cash and cash equivalents	Cash and cash equivalents	$	105,234	$	105,234	$	0	$	0	Cash and cash equivalents	$	32,432	$	32,432	$	—	$	—
Restricted cash and cash equivalents	Restricted cash and cash equivalents	54,436		54,436		0		0		Restricted cash and cash equivalents	57,563		57,563		—		—
Cash, cash equivalents and restricted cash (1)	Cash, cash equivalents and restricted cash (1)	$	159,670	$	159,670	$	0	$	0	Cash, cash equivalents and restricted cash (1)	89,995		89,995		—		—

Municipal debt securities	Municipal debt securities	$	63,926	$	0	$	63,926	$	0	Municipal debt securities	52,266		—		52,266		—
Corporate debt securities	Corporate debt securities	75,014		0		75,014		0		Corporate debt securities	64,928		—		64,928		—
Agency mortgage-backed securities	Agency mortgage-backed securities	267		0		267		0		Agency mortgage-backed securities	85		—		85		—
U.S. government and agency securities	U.S. government and agency securities	1,095		0		1,095		0		U.S. government and agency securities	986		—		986		—
Restricted investments classified as held-to-maturity (2)	Restricted investments classified as held-to-maturity (2)	$	140,302	$	0	$	140,302	$	0	Restricted investments classified as held-to-maturity (2)	$	118,265	$	—	$	118,265	$	—

Deferred compensation investments (3)		$	6,303	$	6,303	$	0	$	0

December 27, 2020
(in thousands) Total fair value Quoted prices in active markets for identical assets (level 1) Significant other observable inputs (level 2) Significant unobservable inputs (level 3)
Cash and cash equivalents $ 62,507 $ 62,507 $ 0 $ 0
Restricted cash and cash equivalents 56,105 56,105 0 0
Cash, cash equivalents and restricted cash (1) $ 118,612 $ 118,612 $ 0 $ 0
Municipal debt securities $ 70,723 $ 0 $ 70,723 $ 0
Corporate debt securities 85,937 0 85,937 0
Agency mortgage-backed securities 512 0 512 0
U.S. government and agency securities 1,124 0 1,124 0
Restricted investments classified as held-to-maturity (2) $ 158,296 $ 0 $ 158,296 $ 0
Deferred compensation investments (3) $ 5,915 $ 5,915 $ 0 $ 0

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	December 26, 2021
(in thousands)	Total fair value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Cash and cash equivalents	$	49,896	$	49,896	$	—	$	—
Restricted cash and cash equivalents	53,289		53,289		—		—
Cash, cash equivalents and restricted cash (1)	103,185		103,185		—		—

Municipal debt securities	58,505		—		58,505		—
Corporate debt securities	78,357		—		78,357		—
Agency mortgage-backed securities	152		—		152		—
U.S. government and agency securities	1,070		—		1,070		—
Restricted investments classified as held-to-maturity (2)	$	138,084	$	—	$	138,084	$	—

(1)Cash, cash equivalents and restricted cash include money market funds and deposits.

(2)Refer to Note 3:3: Restricted Cash and Investments for additional details on our held-to-maturity debt securities.

~~(3)Deferred compensation investments consist of mutual funds and money market funds. Refer to Note~~ 3: ~~Restricted Cash and Investments~~ ~~for additional details on these investments.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

NOTE 3: RESTRICTED CASH AND INVESTMENTS

The following is a summary of the carrying value of our restricted cash and investments:


(in thousands)	(in thousands)	June 27, 2021		December 27, 2020		(in thousands)	June 26, 2022		December 26, 2021
Cash collateral held by insurance carriers	Cash collateral held by insurance carriers	$	26,922	$	26,025	Cash collateral held by insurance carriers	$	29,179	$	28,957
Cash and cash equivalents held in Trust	Cash and cash equivalents held in Trust	26,344		29,410		Cash and cash equivalents held in Trust	27,745		21,590
Investments held in Trust	Investments held in Trust	135,894		152,247		Investments held in Trust	121,447		135,419
Deferred compensation investments		6,303		5,915

Company-owned life insurance policies	Company-owned life insurance policies	28,016		26,267		Company-owned life insurance policies	26,759		32,318
Other restricted cash and cash equivalents	Other restricted cash and cash equivalents	1,170		670		Other restricted cash and cash equivalents	639		2,742
Total restricted cash and investments	Total restricted cash and investments	$	224,649	$	240,534	Total restricted cash and investments	$	205,769	$	221,026

Held-to-maturity

Restricted cash and investments include collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. Our insurance carriers and certain state workers’ compensation programs require us to collateralize a portion of our workers’ compensation obligation. The collateral typically takes the form of cash and cash equivalents and highly rated investment grade securities, primarily in debt and asset-backed securities. The majority of our collateral obligations are held in a trust at the Bank of New York Mellon (“Trust”).

The amortized cost and estimated fair value of our held-to-maturity investments held in Trust, aggregated by investment category as of June ~~27, 2021~~26, 2022 and December ~~27, 2020,~~26, 2021, were as follows:


		June 27, 2021									June 26, 2022
(in thousands)	(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	Municipal debt securities	$	61,240	$	2,686	$	0	$	63,926	Municipal debt securities	$	52,362	$	141	$	(237)	$	52,266
Corporate debt securities	Corporate debt securities	73,396		1,809		(191)		75,014		Corporate debt securities	67,999		12		(3,083)		64,928
Agency mortgage-backed securities	Agency mortgage-backed securities	258		9		0		267		Agency mortgage-backed securities	86		—		(1)		85
U.S. government and agency securities	U.S. government and agency securities	1,000		95		0		1,095		U.S. government and agency securities	1,000		—		(14)		986
Total held-to-maturity investments	Total held-to-maturity investments	$	135,894	$	4,599	$	(191)	$	140,302	Total held-to-maturity investments	$	121,447	$	153	$	(3,335)	$	118,265

December 27, 2020
(in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value
Municipal debt securities $ 67,287 $ 3,436 $ 0 $ 70,723
Corporate debt securities 83,467 2,511 (41) 85,937
Agency mortgage-backed securities 493 19 0 512
U.S. government and agency securities 1,000 124 0 1,124
Total held-to-maturity investments $ 152,247 $ 6,090 $ (41) $ 158,296

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	December 26, 2021
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Municipal debt securities	$	56,346	$	2,159	$	—	$	58,505
Corporate debt securities	77,925		995		(563)		78,357
Agency mortgage-backed securities	148		4		—		152
U.S. government and agency securities	1,000		70		—		1,070
Total held-to-maturity investments	$	135,419	$	3,228	$	(563)	$	138,084

The amortized cost and fair value by contractual maturity of our held-to-maturity investments are as follows:


		June 27, 2021					June 26, 2022
(in thousands)	(in thousands)	Amortized cost		Fair value		(in thousands)	Amortized cost		Fair value
Due in one year or less	Due in one year or less	$	21,607	$	21,826	Due in one year or less	$	22,399	$	22,381
Due after one year through five years	Due after one year through five years	105,331		108,987		Due after one year through five years	99,048		95,884
Due after five years through ten years		8,956		9,489

Total held-to-maturity investments	Total held-to-maturity investments	$	135,894	$	140,302	Total held-to-maturity investments	$	121,447	$	118,265

Actual maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without penalty. We have no significant concentrations of counterparties in our held-to-maturity investment portfolio.

~~Page - 8~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Deferred compensation investments and company-owned life insurance policies

We hold ~~mutual funds, money market funds and~~ company-owned life insurance policies to support our deferred compensation liability. During the year ended December 26, 2021, we also held mutual funds and money market funds. As of December 26, 2021, all of the mutual funds and money market funds were converted into company-owned life insurance policies. Unrealized gains and losses related to ~~these~~ investments still held at June 26, 2022 and June 27, 2021, ~~and June 28, 2020,~~which are included in selling, general and administrative expense on our Consolidated Statements of Operations and Comprehensive Income, ~~(Loss),~~ were as follows:


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended				Twenty-six weeks ended
(in thousands)	(in thousands)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(in thousands)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Unrealized gains (losses)	Unrealized gains (losses)	$	1,549	$	3,114	$	2,426	$	(1,727)	Unrealized gains (losses)	$	(3,549)	$	1,549	$	(5,560)	$	2,426

NOTE 4: SUPPLEMENTAL BALANCE SHEET INFORMATION

Accounts receivable allowance for credit losses

The activity related to the accounts receivable allowance for credit losses was as follows:


		Twenty-six weeks ended					Twenty-six weeks ended
(in thousands)	(in thousands)	June 27, 2021		June 28, 2020		(in thousands)	June 26, 2022		June 27, 2021
Beginning balance	Beginning balance	$	2,921	$	4,288	Beginning balance	$	6,687	$	2,921
Cumulative-effect adjustment (1)		0		524

Current period provision	Current period provision	2,094		5,923		Current period provision	2,572		2,094
Write-offs	Write-offs	(1,176)		(3,053)		Write-offs	(5,258)		(1,176)
Foreign currency translation	Foreign currency translation	4		(26)		Foreign currency translation	(14)		4
Ending balance	Ending balance	$	3,843	$	7,656	Ending balance	$	3,987	$	3,843

~~(1)~~

Page - 9

~~As a result~~Table of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to our accounts receivable allowance for credit losses of $0.5 million as of the beginning of the first quarter of 2020.Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Prepaid expenses and other current assets


(in thousands)	(in thousands)	June 27, 2021		December 27, 2020		(in thousands)	June 26, 2022		December 26, 2021
Prepaid software agreements	Prepaid software agreements	$	7,658	$	8,643	Prepaid software agreements	$	8,147	$	10,078
Other prepaid expenses	Other prepaid expenses	7,320		8,631		Other prepaid expenses	7,311		8,858
Other current assets	Other current assets	9,461		8,863		Other current assets	6,766		12,678
Prepaid expenses and other current assets	Prepaid expenses and other current assets	$	24,439	$	26,137	Prepaid expenses and other current assets	$	22,224	$	31,614

Other current liabilities

~~Accrued wages and benefits~~

(in thousands) June 27,
2021 December 27,
2020
Deferred employer payroll tax (1) $ 58,230 $ 55,420
Other accrued wages and benefits 78,445 67,237
Accrued wages and benefits $ 136,675 $ 122,657

(1) On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act, which among other things, provided employer payroll tax credits for wages paid to employees who were unable to work during the COVID-19 outbreak. Additionally, we were allowed to delay payments for the employer portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees. We anticipate the deferred amount will be paid by September 15, 2021.


(in thousands)	June 26, 2022		December 26, 2021
Contract liabilities	$	7,041	$	626
Other current liabilities	5,577		6,882
Other current liabilities	$	12,618	$	7,508

NOTE 5: ~~WORKERS’~~WORKERS' COMPENSATION INSURANCE AND RESERVES

We provide workers’ compensation insurance for our associates and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis. This results in our being substantially self-insured.

~~Page - 9~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Effective July 1, 2022, we have increased our deductible limit to $5.0 million on a “per occurrence” basis.

Our workers’ compensation reserve for claims below the deductible limit is discounted to its estimated net present value using discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. The weighted average discount rate was ~~1.7% and 1.8%~~1.6% at June ~~27, 2021~~26, 2022 and December ~~27, 2020, respectively.~~26, 2021. Payments made against self-insured claims are made over a weighted average period of approximately 5.5 years as of June ~~27, 2021.~~26, 2022.

The following table presents a reconciliation of the undiscounted workers’ compensation reserve to the discounted workers’ compensation reserve for the periods presented:


(in thousands)	(in thousands)	June 27, 2021		December 27, 2020		(in thousands)	June 26, 2022		December 26, 2021
Undiscounted workers’ compensation reserve	Undiscounted workers’ compensation reserve	$	271,837	$	273,502	Undiscounted workers’ compensation reserve	$	284,051	$	273,000
Less discount on workers’ compensation reserve	Less discount on workers’ compensation reserve	16,942		18,009		Less discount on workers’ compensation reserve	16,453		16,806
Workers’ compensation reserve, net of discount	Workers’ compensation reserve, net of discount	254,895		255,493		Workers’ compensation reserve, net of discount	267,598		256,194
Less current portion	Less current portion	60,032		66,007		Less current portion	56,024		61,596
Long-term portion	Long-term portion	$	194,863	$	189,486	Long-term portion	$	211,574	$	194,598

Payments made against self-insured claims were ~~$22.4~~$21.5 million and ~~$28.0~~$22.4 million for the twenty-six weeks ended June ~~27, 2021~~26, 2022 and June ~~28, 2020,~~27, 2021, respectively.

Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and we record a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments available during the year in which the liability was incurred. AtThe rates used to discount excess claims incurred during the twenty-six weeks ended June ~~27,~~26, 2022 and fifty-two weeks ended December 26, 2021 were 2.1% and ~~December 27, 2020, the weighted average rate was 1.4% and 1.3%~~1.8%, respectively. The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years. The discounted workers’ compensation reserve for excess claims was ~~$58.6~~$80.0 million and ~~$54.0~~$62.7 million, as of June ~~27, 2021~~26, 2022 and December ~~27, 2020,~~26, 2021, respectively. The discounted receivables from insurance companies, net of valuation allowance, were ~~$57.2~~$78.6 million and ~~$52.9~~$61.4 million as of June ~~27, 2021~~26, 2022 and December ~~27, 2020,~~26, 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Workers’ compensation cost consists primarily of changes in self-insurance reserves net of changes in discount, monopolistic jurisdictions’ premiums, insurance premiums and other miscellaneous expenses. Workers’ compensation cost of ~~$9.3~~$9.8 million and ~~$9.2~~$9.3 million was recorded in cost of services on our Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~ for the thirteen weeks ended June 26, 2022 and June 27, 2021, ~~and June 28, 2020,~~ respectively, and ~~$19.4~~$21.1 million and ~~$23.5~~$19.4 million for the twenty-six weeks ended June 26, 2022 and June 27, 2021, ~~and June 28, 2020,~~ respectively.

NOTE 6: LONG-TERM DEBT

We have a revolving credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A. and HSBC Bank USA, N.A., which provides for a revolving line of credit of up to $300.0 million, and is currently set to mature on March 16, 2025 (“Revolving Credit Facility”). We have an option to increase the amount to $450.0 million, subject to lender approval. Included in the Revolving Credit Facility is a $30.0 million sub-limit for “Swingline” loans and a $125.0 million sub-limit for letters of credit. At June 26, 2022, $7.3 million was utilized by outstanding standby letters of credit, leaving $292.7 million unused under the Revolving Credit Facility. At December 26, 2021, $6.2 million was utilized by outstanding standby letters of credit.

Under the terms of the Revolving Credit Facility, we pay a variable rate of interest on funds borrowed under the revolving line of credit in excess of the Swingline loans, based on the U.S. Dollar London Interbank Offered Rate (“LIBOR”) plus an applicable spread between 1.25% and 3.50%. Alternatively, at our option, we may pay interest based on a base rate plus an applicable spread between 0.25% and 1.50%. The base rate is the greater of the prime rate (as announced by Bank of America), or the federal funds rate plus 0.50%. The applicable spread is determined by the consolidated leverage ratio, as defined in the Revolving Credit Facility.

Under the terms of the Revolving Credit Facility, we are required to pay a variable rate of interest on funds borrowed under the Swingline loan based on the base rate plus applicable spread between 0.25% and 1.50%, as described above.

A commitment fee between 0.25% and 0.50% is applied against the Revolving Credit Facility’s unused borrowing capacity, with the specific rate determined by the consolidated leverage ratio, as defined in the second amendment to our credit agreement. Letters of credit are priced at a margin between 1.00% and 3.25%, plus a fronting fee of 0.50%.

Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S. domestic subsidiaries, and are secured by substantially all of the assets of TrueBlue and material U.S. domestic subsidiaries. The second amendment to our credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants.

The following financial covenants, as defined in the second amendment to our credit agreement, were in effect as of June 26, 2022:

•Consolidated leverage ratio less than 3.00, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement. As of June 26, 2022, our consolidated leverage ratio was 0.06.

•Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense. As of June 26, 2022, our consolidated fixed charge ratio was 104.04.

As of June 26, 2022, we were in compliance with all effective covenants related to the Revolving Credit Facility.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 6:7: COMMITMENTS AND CONTINGENCIES

Workers’ compensation commitments

We have provided our insurance carriers and certain states with commitments in the form and amounts listed below:


(in thousands)	(in thousands)	June 27, 2021		December 27, 2020		(in thousands)	June 26, 2022		December 26, 2021
Cash collateral held by workers’ compensation insurance carriers	Cash collateral held by workers’ compensation insurance carriers	$	22,609	$	22,253	Cash collateral held by workers’ compensation insurance carriers	$	23,332	$	23,056
Cash and cash equivalents held in Trust	Cash and cash equivalents held in Trust	26,344		29,410		Cash and cash equivalents held in Trust	27,745		21,590
Investments held in Trust	Investments held in Trust	135,894		152,247		Investments held in Trust	121,447		135,419
Letters of credit (1)	Letters of credit (1)	6,095		6,095		Letters of credit (1)	6,160		6,160
Surety bonds (2)	Surety bonds (2)	20,831		20,616		Surety bonds (2)	21,898		21,969
Total collateral commitments	Total collateral commitments	$	211,773	$	230,621	Total collateral commitments	$	200,582	$	208,194

(1)We have agreements with certain financial institutions to issue letters of credit as collateral.

(2)Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which are determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subject to a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.

~~Page - 10~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Legal contingencies and developments

We are involved in various proceedings arising in the normal course of conducting business. We believe the liabilities included in our financial statements reflect the probable loss that can be reasonably ~~estimated. The amounts recorded~~estimated and are ~~immaterial and resolution~~immaterial. We also believe that the aggregate range of ~~those proceedings are not~~reasonably possible losses for the Company's exposure in excess of the amount accrued is expected to be immaterial to the Company. It remains possible that despite our current belief, material differences in actual outcomes or changes in management's evaluation or predictions could arise that could have a material effect on ~~our~~the Company's financial condition, results of operations ~~financial condition~~ or cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE ~~7: SHAREHOLDERS’~~8: SHAREHOLDERS' EQUITY

Changes in the balance of each component of shareholders’ equity during the reporting periods were as follows:


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended				Twenty-six weeks ended
(in thousands)	(in thousands)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(in thousands)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021

Common stock shares	Common stock shares									Common stock shares
Beginning balance	Beginning balance	35,474		36,128		35,493		38,593		Beginning balance	33,608		35,474		34,861		35,493
Purchases and retirement of common stock	Purchases and retirement of common stock	0		0		0		(2,930)		Purchases and retirement of common stock	(907)		—		(2,234)		—
Net issuance under equity plans, including tax benefits	Net issuance under equity plans, including tax benefits	6		(76)		(17)		339		Net issuance under equity plans, including tax benefits	(17)		6		57		(17)
Stock-based compensation	Stock-based compensation	30		0		34		50		Stock-based compensation	—		30		—		34
Ending balance	Ending balance	35,510		36,052		35,510		36,052		Ending balance	32,684		35,510		32,684		35,510

Common stock amount	Common stock amount									Common stock amount
Beginning balance	Beginning balance	$	1	$	1	$	1	$	1	Beginning balance	$	1	$	1	$	1	$	1
Current period activity	Current period activity	—		—		—		—		Current period activity	—		—		—		—
Ending balance	Ending balance	1		1		1		1		Ending balance	1		1		1		1

Retained earnings	Retained earnings									Retained earnings
Beginning balance	Beginning balance	459,958		435,804		452,017		639,210		Beginning balance	483,170		459,958		508,813		452,017
Net income (loss)		15,884		(8,168)		22,782		(158,662)
Net income										Net income	24,013		15,884		34,532		22,782
Purchases and retirement of common stock (1)	Purchases and retirement of common stock (1)	0		0		0		(52,346)		Purchases and retirement of common stock (1)	(24,613)		—		(60,939)		—
Net issuance under equity plans, including tax benefits	Net issuance under equity plans, including tax benefits	152		51		(2,148)		(1,420)		Net issuance under equity plans, including tax benefits	51		152		(3,597)		(2,148)
Stock-based compensation	Stock-based compensation	3,573		2,838		6,916		4,345		Stock-based compensation	675		3,573		4,487		6,916
Change in accounting standard cumulative-effect adjustment (2)		—		—		—		(602)

Ending balance	Ending balance	479,567		430,525		479,567		430,525		Ending balance	483,296		479,567		483,296		479,567

Accumulated other comprehensive loss	Accumulated other comprehensive loss									Accumulated other comprehensive loss
Beginning balance, net of tax	Beginning balance, net of tax	(14,332)		(19,863)		(14,828)		(13,238)		Beginning balance, net of tax	(15,620)		(14,332)		(15,747)		(14,828)
Foreign currency translation adjustment	Foreign currency translation adjustment	(6)		2,098		490		(4,527)		Foreign currency translation adjustment	(1,724)		(6)		(1,597)		490
Ending balance, net of tax	Ending balance, net of tax	(14,338)		(17,765)		(14,338)		(17,765)		Ending balance, net of tax	(17,344)		(14,338)		(17,344)		(14,338)

Total shareholders’ equity ending balance	Total shareholders’ equity ending balance	$	465,230	$	412,761	$	465,230	$	412,761	Total shareholders’ equity ending balance	$	465,953	$	465,230	$	465,953	$	465,230

(1)Under applicable Washington State law, shares purchased are not displayed separately as treasury stock on our Consolidated Balance Sheets and are treated as authorized but unissued shares. It is our accounting policy to first record these purchases as a reduction to our common stock account. Once the common stock account has been reduced to a nominal balance, remaining purchases are recorded as a reduction to our retained earnings. Furthermore, activity in our common stock account related to stock-based compensation is also recorded to retained earnings until such time as the reduction to retained earnings due to stock repurchases has been recovered.

~~(2)As a result of our adoption of the accounting standard for credit losses, we recognized a cumulative-effect adjustment to retained earnings of $0.6 million in the first quarter of 2020.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

NOTE 8:9: INCOME TAXES

Our income tax provision or benefit for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate and, if our estimated tax rate changes, we make a cumulative adjustment. Our quarterly tax provision and quarterly estimate of our annual effective tax rate are subject to variation due to several factors, including variability in accurately predicting our full year pre-tax income and loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, and relative changes in 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. 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 is lower.

Our effective income tax rate for the twenty-six weeks ended June ~~27, 2021~~26, 2022 was ~~13.9%~~17.1%. The difference between the statutory federal income tax rate of 21% and our effective tax rate ~~results~~was primarily ~~from~~due to hiring credits, including the ~~federal~~ Work Opportunity Tax Credit (“WOTC”)., as well as stock-based compensation. WOTC is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. Other differences between the statutory federal income tax rate result from state and foreign income taxes and certain non-deductible and non-taxable ~~items, tax effects~~items.

Page - 13

Table of ~~stock-based compensation and additional benefit from the Coronavirus Aid, Relief and Economic Security Act of 2020.~~Contents


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 9:10: NET INCOME ~~(LOSS)~~ PER SHARE

Diluted common shares were calculated as follows:

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except per share data) June 27,
2021 June 28,
2020 June 27,
2021 June 28,
2020
Net income (loss) $ 15,884 $ (8,168) $ 22,782 $ (158,662)
Weighted average number of common shares used in basic net income (loss) per common share 34,818 35,077 34,746 36,166
Dilutive effect of non-vested restricted stock 534 0 459 0
Weighted average number of common shares used in diluted net income (loss) per common share 35,352 35,077 35,205 36,166
Net income (loss) per common share:
Basic $ 0.46 $ (0.23) $ 0.66 $ (4.39)
Diluted $ 0.45 $ (0.23) $ 0.65 $ (4.39)
Anti-dilutive shares 26 580 54 565


	Thirteen weeks ended				Twenty-six weeks ended
(in thousands, except per share data)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Net income	$	24,013	$	15,884	$	34,532	$	22,782

Weighted average number of common shares used in basic net income per common share	32,707		34,818		33,318		34,746
Dilutive effect of non-vested stock-based awards	442		534		514		459
Weighted average number of common shares used in diluted net income per common share	33,149		35,352		33,832		35,205

Net income per common share:
Basic	$	0.73	$	0.46	$	1.04	$	0.66
Diluted	$	0.72	$	0.45	$	1.02	$	0.65

Anti-dilutive shares	322		26		457		54

NOTE ~~10:~~11: SEGMENT INFORMATION

Our operating segments and reportable segments are described below:

Our PeopleReady reportable segment provides blue-collar, contingent staffing through the PeopleReady operating segment. PeopleReady provides on-demand and skilled labor in a broad range of industries that include construction, manufacturing and logistics, warehousing and distribution, retail, waste and recycling, energy, hospitality, and general labor.

Our PeopleManagement reportable segment provides contingent labor and outsourced industrial workforce solutions, primarily on-site at the client’s facility, through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:

•PeopleManagement On-Site: On-site management and recruitment for the contingent industrial workforce of manufacturing, ~~warehouse,~~warehousing and distribution facilities; and

•PeopleManagement Centerline: Recruitment and management of contingent and dedicated commercial drivers to the transportation and distribution industries.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Our PeopleScout reportable segment provides high-volume, permanent employee recruitment process outsourcing, employer branding services and management of outsourced labor service providers through the following operating segments, which we have aggregated into one reportable segment in accordance with U.S. GAAP:

•PeopleScout RPO: Outsourced recruitment of permanent employees on behalf of clients and employer branding services; and

•PeopleScout MSP: Management of multiple third-party staffing vendors on behalf of clients.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table presents our revenue disaggregated by major source and segment and a reconciliation of segment revenue from services to total company revenue:


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended				Twenty-six weeks ended
(in thousands)	(in thousands)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(in thousands)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenue from services:	Revenue from services:									Revenue from services:
Contingent staffing	Contingent staffing									Contingent staffing
PeopleReady	PeopleReady	$	299,316	$	209,151	$	559,708	$	508,445	PeopleReady	$	317,943	$	299,316	$	623,633	$	559,708
PeopleManagement	PeopleManagement	152,356		118,661		304,110		260,275		PeopleManagement	161,938		152,356		325,757		304,110
Human resource outsourcing	Human resource outsourcing									Human resource outsourcing
PeopleScout	PeopleScout	64,283		31,132		110,843		84,476		PeopleScout	89,372		64,283		171,378		110,843
Total company	Total company	$	515,955	$	358,944	$	974,661	$	853,196	Total company	$	569,253	$	515,955	$	1,120,768	$	974,661

The following table presents a reconciliation of segment profit to income ~~(loss)~~ before tax ~~expense (benefit):~~expense:


		Thirteen weeks ended				Twenty-six weeks ended					Thirteen weeks ended				Twenty-six weeks ended
(in thousands)	(in thousands)	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020		(in thousands)	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Segment profit (loss):
Segment profit:										Segment profit:
PeopleReady	PeopleReady	$	18,437	$	633	$	30,297	$	8,288	PeopleReady	$	20,325	$	18,437	$	36,544	$	30,297
PeopleManagement	PeopleManagement	3,221		1,803		6,337		1,489		PeopleManagement	4,228		3,221		7,207		6,337
PeopleScout	PeopleScout	10,857		(2,782)		14,894		(274)		PeopleScout	20,593		10,857		31,565		14,894
Total segment profit (loss)		32,515		(346)		51,528		9,503
Corporate unallocated		(7,307)		(4,929)		(12,926)		(10,138)
Work Opportunity Tax Credit processing fees		(30)		0		(165)		(135)
Total segment profit										Total segment profit	45,146		32,515		75,316		51,528
Corporate unallocated expense										Corporate unallocated expense	(6,531)		(7,307)		(13,829)		(12,926)
Third-party processing fees for hiring tax credits										Third-party processing fees for hiring tax credits	(162)		(30)		(324)		(165)
Amortization of software as a service assets	Amortization of software as a service assets	(646)		(565)		(1,319)		(1,117)		Amortization of software as a service assets	(699)		(646)		(1,446)		(1,319)

Goodwill and intangible asset impairment charge		0		0		0		(175,189)

Workforce reduction costs		(14)		(11,011)		(84)		(12,319)

PeopleReady technology implementation costs										PeopleReady technology implementation costs	(1,748)		—		(4,298)		—
COVID-19 government subsidies, net	COVID-19 government subsidies, net	2,296		3,104		4,039		3,104		COVID-19 government subsidies, net	—		2,296		—		4,039
Other benefits (costs)	Other benefits (costs)	(854)		(228)		(1,940)		5,905		Other benefits (costs)	491		(868)		355		(2,024)
Depreciation and amortization	Depreciation and amortization	(7,017)		(7,256)		(13,979)		(16,350)		Depreciation and amortization	(7,245)		(7,017)		(14,532)		(13,979)
Income (loss) from operations		18,943		(21,231)		25,154		(196,736)
Income from operations										Income from operations	29,252		18,943		41,242		25,154
Interest expense and other income, net	Interest expense and other income, net	724		(412)		1,299		(149)		Interest expense and other income, net	(110)		724		395		1,299
Income (loss) before tax expense (benefit)		$	19,667	$	(21,643)	$	26,453	$	(196,885)
Income before tax expense										Income before tax expense	$	29,142	$	19,667	$	41,637	$	26,453

Asset information by reportable segment is not presented as we do not manage our segments on a balance sheet basis.

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Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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~~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. ~~Our operations~~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 ~~managed as three~~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. Our PeopleReady segment offers on-demand, industrial staffing; our PeopleManagement segment offers contingent, on-site industrial staffing and commercial driver services; and our PeopleScout segment offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions. See Note 10: ~~Segment Information, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q, for additional details on our operating segments and reportable segments.~~

~~The COVID-19 pandemic~~PeopleReady

Beginning in early 2020, the coronavirus (“COVID-19”) outbreak, characterized as a pandemic by the World Health Organization on March 11, 2020, led to a series of significant economic disruptions globally.Throughout the pandemic, our business has remained open and we have continued to provide key services to essential businesses and other businesses as COVID-19 restrictions were lifted. Nevertheless, the preventative measures and individual precautions taken to help curb the spread of COVID-19, and the resulting negative impact on economic activity, continue to have an adverse impact on client demand for our services, availability of qualified associates and our business results. ~~In early 2020, we implemented comprehensive measures across our businesses to keep our associates, employees and clients healthy and safe.~~We remain committed to prioritizing the health and well-being of our associates, employees and clients. Our support center employees and management team have successfully operated the business with our work-from-home arrangements. We plan to return to our support center offices, on a limited basis, in the fall of 2021.

In our two largest markets, the United States of America (“U.S.”) and Canada, vaccinations continue to be a top priority and are being supported by governmental programs. As of July 22, 2021, approximately 49% of the U.S. and 53% of the Canadian populations have been fully vaccinated. While the vaccination programs have helped to reopen these markets, we continue to monitor the pandemic’s evolution closely. Despite uneven recovery in certain markets and industries, we are seeing growth in new client wins and higher existing client volumes, particularly in those markets and industries hit hardest by COVID-19 in 2020. In addition, our continued focus on efficiently managing costs while investing in digital strategies and sales resources has allowed us to accelerate our strategic priorities and emerge stronger as the economic recovery continues.

~~Our strong balance sheet and operational flexibility have helped us successfully manage through the ongoing impacts of the COVID-19 pandemic, while protecting our cash flow and liquidity.~~ ~~For additional discussion on the uncertainties and business risks associated with COVID-19, refer to “Risk Factors” in Part II, Item 1A of this Form 10-Q.~~

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~Second quarter of 2021 highlights~~

~~Revenue from services~~

Total company revenue grew 43.7% to $516.0 million for the thirteen weeks ended June 27, 2021, compared to the same period in the prior year. The increase was due to the recovery of client demand for our services, which experienced a significant drop in the prior year due to the negative impact of the COVID-19 pandemic. Revenue trends have also improved compared to the fiscal first quarter of 2021, which had revenue declines of 7.2%, compared to the same period in the prior year. This improvement is primarily driven by ~~improving volumes from existing clients, including clients in industries that were disproportionately impacted by COVID-19, as well as new client wins~~.

•PeopleReady, our largest segment ~~experienced~~by revenue, ~~growth of 43.1% for the thirteen weeks ended June 27, 2021, compared to the same period in the prior year. PeopleReady~~ provides a wide range of staffing solutions for on-demand contingent general and skilled labor. PeopleReady has seen improved revenue trends across most geographies and industries, especially those in industries that were hit the hardest by COVID-19, such as construction, transportation, manufacturing and hospitality. However, the supply of workers is a challenge in certain markets that we believe have been temporarily impacted by government responses to COVID-19, which include stimulus checks, elevated federal unemployment benefits and other direct payments to individuals. As compared to our other segments, PeopleReady experienced the most pressure on the available supply of workers, primarily due to a lower average wage, the temporary nature of the positions and the shorter notice period we receive to fill open positions. While some states began opting out of the federal unemployment benefits in late June, the majority of the recipients of these benefits live in states where the program is not set to expire until September 6, 2021.

•PeopleManagement, our lowest margin segment, experienced revenue growth of 28.4% for the thirteen weeks ended June 27, 2021, compared to the same period in the prior year. PeopleManagement supplies an outsourced workforce that involves multi-year, multi-million dollar on-site and driver relationships. PeopleManagement revenue growth was driven by an ~~increase in volumes from existing~~ clients ~~as well as~~ ~~new client wins. While we have seen some pressure on the s~~upply of workers in certain markets, the longer-term nature of our employment relationships and the advance notice we receive to fill open positions within our PeopleManagement segment have prevented the lack of supply of workers from having a meaningful impact on our existing business. However, the supply of workers has acted as a constraint on near-term growth.

•PeopleScout, our highest margin segment, experienced a revenue growth of 106.5% for the thirteen weeks ended June 27, 2021, compared to the same period in the prior year. PeopleScout offers RPO and MSP solutions. PeopleScout has seen a strong recovery in volumes from existing customers, especially those in industries that were hit the hardest by COVID-19, as well as ~~new client wins~~.

~~Gross profit~~

Total company gross profit as a percentage of revenue for the thirteen weeks ended June 27, 2021 increased by 320 basis points to 26.4%, compared to 23.2% for the same period in the prior year. Our staffing businesses contributed 70 basis points of improvement, primarily attributable to a benefit of 80 basis points due to lower workers’ compensation expense as a result of a reduction to prior year reserves associated with favorable patterns in claim development. Our PeopleScout business contributed 250 basis points of the improvement, 80 basis points was due to workforce reduction costs incurred in Q2 2020, and the remaining 170 basis points was driven by operating leverage from higher volume in 2021.

~~Selling, general and administrative (“SG&A”) expense~~

Total company SG&A expense increased by $13.3 million to $110.5 million, or 21.4% of revenue for the thirteen weeks ended June 27, 2021, compared to $97.2 million, or 27.1% of revenue for the same period in the prior year. The prior period includes $8.0 million in workforce reduction costs incurred as a result of COVID-19, which represents 2.2% of revenue in the prior year. We have continued to balance cost discipline with preserving our operational strengths, which has positioned us well for growth as economic conditions continue to improve.

~~Income from operations~~

Total company income from operations was $18.9 million for the thirteen weeks ended June 27, 2021, compared to a loss from operations of $21.2 million for the same period in the prior year. The increase in income from operations was primarily due to improving revenue trends led by recovering industry performance, including those disproportionately impacted by COVID-19, a series of new client wins, expanding gross margin, and disciplined cost management.

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~Net income~~

Net income was $15.9 million, or $0.45 per diluted share for the thirteen weeks ended June 27, 2021, compared to a net loss of $8.2 million, or $0.23 per diluted share for the same period in the prior year. Net income for the thirteen weeks ended June 27, 2021 includes income tax expense of $3.8 million resulting in an effective tax rate of 19.2%, compared to a benefit of $13.5 million and a effective tax rate of 62.3% for the same period in the prior year. The difference between our statutory tax rates and our effective income tax rate results primarily from the federal Work Opportunity Tax Credit (“WOTC”) and the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The large decrease in rates when compared to the same period in the prior year was due to these favorable adjustments increasing our effective tax rate in the prior year when it was a benefit due to the loss from operations, and reducing our tax rate in the current year when it was an expense due to the income from operations. WOTC is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates. The CARES Act is an emergency economic aid package to help mitigate the impact of COVID-19. Among other things, the CARES Act provides certain changes to tax laws, including the ability to carry back losses to obtain refunds related to prior year tax returns where the federal tax rate was 35%.

~~Additional highlights~~

As of June 27, 2021, we are in a strong financial position with cash and cash equivalents of $105.2 million, no outstanding debt and $169.5 million available under the most restrictive covenant of our revolving credit agreement (“Revolving Credit Facility”, for total liquidity of $274.8 million.

~~RESULTS OF OPERATIONS~~

~~We report our business as three reportable segments described below and in Note 10:~~ ~~Segment Information, to our consolidated financial statements found in Item 1 of this Quarterly Report on Form 10-Q.~~

•~~PeopleReadyprovides~~ 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 ~~that include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, energy, retail and hospitality. As of December 27, 2020, we had a~~through our network of ~~629~~ branches across all 50 states in the United States (“U.S.”), Canada and Puerto ~~Rico. Complementing our branch network is~~Rico, and increasingly through our industry-leading mobile app, JobStackTM~~, which connects people with work 24/7. This~~. 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, as we embrace a digital future.~~rates.

•PeopleManagement

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.~~facility as an integral part of the production and logistics process. We ~~provide~~offer scalable solutions to meet the volume requirements of labor-intensive manufacturing, warehousing and distribution and fulfillment facilities. Our dedicated service teams work closely with on-site management as an integral part of the production and logistics process, managing all or a subset of the contingent labor for a facility or operational function. Our on-site staffing solutions providefacilities, by providing large-scale sourcing, screening, recruiting and management of the contingent workforce at a client’s facility in order to achieve faster hiring, lower total workforce cost, increase safety and compliance, improve retention, create greater volume flexibility, and enhance strategic decision-making through robust reporting and analytics. Our On-Site operating segment includes our Staff Management | SMX and SIMOS Insourcing Solutions branded service offerings, which provide hourly and productivity-based (cost per unit) pricing options for industrial staffing solutions. Client contracts are generally multi year in duration. The productivity-based pricing leverages a strategically engineered on-site solution to incentivize performance improvements in cost, quality and on-time delivery using a fixed price-per-unit approach. Both hourly and productivity-based pricing are impacted by factors such as geography, volume, job type, and degree of recruiting difficulty.

workforce. PeopleManagement also provides dedicated and contingent commercial truck drivers to the transportation and distribution industries through our Centerline Drivers (“Centerline”) brand. Centerline ~~delivers~~matches drivers ~~specifically matched~~ 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

•PeopleScout

PeopleScout, our smallest segment by revenue, offers ~~RPO~~recruitment process outsourcing (“RPO”) and ~~MSP~~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. ~~We are recognized as an industry leader for RPO services.~~ Our ~~solution is highly scalable and flexible, which allows for outsourcing of all or a subset of skill categories across a series of recruitment, hiring and onboarding steps. Our solution delivers~~programs deliver improved talent quality and candidate experience, faster hiring, increased scalability, lower cost of recruitment, greater flexibility, and ~~increased~~improved regulatory compliance. ~~Our clients outsource the recruitment process to PeopleScout in all major industries and jobs.~~ 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. Affinix uses artificial intelligence and machine learning to search the web and source candidates, which means we can create the first slate of candidates for a job posting within minutes rather than days. Client contracts are generally multi year in duration and pricing is typically composed of a fee for each hire and talent consulting fees. Pricing is impacted by factors such as geography, volume, job type, degree of recruiting difficulty, and the scope of outsourced recruitment and employer branding services included.

PeopleScout also includes our MSP business, which manages our clients’ contingent labor programs including vendor selection, performance management, compliance monitoring and risk management. AsOur 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 ~~client’s exclusive MSP, we have dedicated service delivery teams which~~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 ~~as an integrated partner with~~for new clients who are utilizing our ~~clients~~services to ~~increase the productivity of their contingent workforce program.~~fulfill short-term hiring needs.

Total company ~~results~~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 millionfor the thirteen weeks ended June 26, 2022 compared to $15.9 million for the same period in the prior year.

~~The following table presents selected~~As of June 26, 2022, we were in a strong financial ~~data:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages and per share data) Jun 27,
2021 % of revenue Jun 28,
2020 % of revenue Jun 27,
2021 % of revenue Jun 28,
2020 % of revenue
Revenue from services $ 515,955 $ 358,944 $ 974,661 $ 853,196
Gross profit $ 136,468 26.4 % $ 83,225 23.2 % $ 247,042 25.3 % $ 209,384 24.5 %
Selling, general and administrative expense 110,508 21.4 % 97,200 27.1 % 207,909 21.3 % 214,581 25.2 %
Depreciation and amortization 7,017 1.4 % 7,256 2.0 % 13,979 1.4 % 16,350 1.9 %
Goodwill and intangible asset impairment charge — — — 175,189
Income (loss) from operations 18,943 3.7 % (21,231) (5.9) % 25,154 2.6 % (196,736) (23.1) %
Interest expense and other income, net 724 (412) 1,299 (149)
Income (loss) before tax expense (benefit) 19,667 (21,643) 26,453 (196,885)
Income tax expense (benefit) 3,783 (13,475) 3,671 (38,223)
Net income (loss) $ 15,884 3.1 % $ (8,168) (2.3) % $ 22,782 2.3 % $ (158,662) (18.6) %
Net income (loss) per diluted share $ 0.45 $ (0.23) $ 0.65 $ (4.39)
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.

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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 and per share data)	Jun 26, 2022		% of revenue		Jun 27, 2021		% of revenue			Jun 26, 2022		% of revenue		Jun 27, 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 administrative expense	122,034		21.4		110,508		21.4			242,602		21.6		207,909		21.3
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 income, net	(110)				724					395				1,299
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

~~Revenue from services by reportable segment was as follows:~~


	Thirteen weeks ended										Twenty-six weeks ended
(in thousands, except percentages)	Jun 26, 2022		Growth %		Segment % of total		Jun 27, 2021		Segment % of total		Jun 26, 2022		Growth %		Segment % of total		Jun 27, 2021		Segment % of 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	%

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27,
2021 Growth % Segment % of total Jun 28,
2020 Segment % of total Jun 27,
2021 Growth
% Segment % of total Jun 28,
2020 Segment % of total
Revenue from services:
PeopleReady $ 299,316 43.1 % 58.0 % $ 209,151 58.2 % $ 559,708 10.1 % 57.4 % $ 508,445 59.6 %
PeopleManagement 152,356 28.4 29.5 118,661 33.1 304,110 16.8 31.2 260,275 30.5
PeopleScout 64,283 106.5 12.5 31,132 8.7 110,843 31.2 11.4 84,476 9.9
Total company $ 515,955 43.7 % 100.0 % $ 358,944 100.0 % $ 974,661 14.2 % 100.0 % $ 853,196 100.0 %

Our PeopleReady and PeopleManagement services supply contingent workforce solutions to minimize the cost and effort of hiring and managing permanent employees. This allows for a rapid response to uncertainty in business conditions through the ability to replace absent employees, fill new positions, and convert fixed or permanent labor costs to variable costs.

Our PeopleScout services involve transitioning various functions handled by internal human resources and labor procurement on a permanent or project basis. Human resource departments are faced with increasingly complex operational and regulatory requirements, increased candidate expectations, an expanding talent technology landscape, and pressure to achieve efficiencies, which increase the need to migrate non-core functions to outsourced providers like PeopleScout. PeopleScout can more effectively find and engage high-quality talent, leverage talent acquisition technology, and scale their talent acquisition function to keep pace with changing business needs.

For these reasons, client demand for contingent workforce solutions and outsourced recruiting services are dependent on the overall strength of the economy, labor market and trends in workforce flexibility.

Total company revenue grew ~~43.7%~~10.3% to ~~$516.0~~$569.3 million for the thirteen weeks ended June ~~27, 2021,~~26, 2022, and grew ~~14.2%~~15.0% to ~~$974.7~~$1,120.8 million for the twenty-six weeks ended June ~~27, 2021,~~26, 2022, compared to the same periods in the prior year, respectively. The growth was ~~due to a recovery in client~~driven by continued demand for our services, which had experienced a significant drop in the prior year due to the negative impact the COVID-19 pandemic had on our business. Revenue trends have also improved compared to the fiscal first quarter of 2021, which had a revenue decline of 7.2%, compared to the same period in the prior year. This improvement is primarily driven by ~~improving volumes from existing clients, including clients in industries that were disproportionately impacted by COVID-19, as well as~~ ~~new client wins~~.services.

PeopleReady

PeopleReady revenue grew 6.2% to ~~$299.3~~$317.9 million for the thirteen weeks ended June ~~27, 2021,~~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 ~~43.1% increase~~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 ~~grew~~was widespread across most geographies. However, growth tapered to ~~$559.7 million for the twenty-six weeks ended~~2.7% in June, ~~27, 2021, a 10.1% increase~~ compared to the same period in the prior ~~year. PeopleReady has seen improved revenue trends~~year, as clients reassessed their labor needs on new projects across most geographies and industries, ~~especially those in~~most notably within the services and hospitality industries, ~~that were hit~~given the hardest by COVID-19, such as construction, transportation, manufacturing and hospitality. The supply of workers is a challenge in certain markets, which we believe is temporarily impacted by government responses to COVID-19, which include stimulus checks, elevated federal unemployment benefits and other direct payments to individuals. While some states began opting out of these unemployment benefits in late June, the majority of the recipients live in states where the program is not set to expire until September 6, 2021. Revenue trends have improved compared to the fiscal first quarter of 2021, which had revenue declines of 13.0%, compared to the same period in the prior year.current economic climate.

We believe the revenue growth has been supported by the use of our ~~industry-leading~~ JobStack mobile app that digitally connects ~~workers~~associates with ~~jobs.~~work. During the second quarter of ~~2021,~~2022, PeopleReady dispatched approximately ~~788,000~~847,000 shifts via JobStack, compared to 788,000 for the same period in the prior year, and ~~achieved a~~our digital fill rate increased to 63% at the higher volume of ~~58%, an improvement of five percentage points~~revenue, compared to 58% for the same period in the prior year. We are focused on encouraging clients to become JobStack heavy client users, which we define as clients with 50 or more touches on JobStack per month. Heavy client users have consistently posted better year-over-year growth rates compared to other PeopleReady clients. Our heavy client user mix increased from 30% of PeopleReady’s U.S. on-demand business for June 2020, to 46% in June 2021.

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PeopleManagement

PeopleManagement revenue grew 6.3% to ~~$152.4~~$161.9 million for the thirteen weeks ended June ~~27, 2021, a 28.4% increase compared to the same period in the prior year,~~26, 2022, and grew 7.1% to ~~$304.1~~$325.8 million for the twenty-six weeks ended June ~~27, 2021, a 16.8% increase~~26, 2022, compared to the same ~~period~~periods in the prior year. ~~The~~PeopleManagement’s revenue growth was driven by ~~new~~existing client ~~wins and continued~~ ~~increase in volumes from existing clients.~~ ~~Revenue trends have improved compared to~~growth, despite the fiscal first quarter of 2021, which had revenue growth of 7.2%, compared to the same period in the prior year. This improvement in the second quarter was broad-based across most of the industries we serve.global supply chain challenges, as well as strong demand for commercial trucking services.

PeopleScout

PeopleScout revenue grew 39.0% to ~~$64.3~~$89.4 million for the thirteen weeks ended June ~~27, 2021, a 106.5% increase compared to the same period in the prior year,~~26, 2022, and grew 54.6% to ~~$110.8~~$171.4 million for the twenty-six weeks ended June ~~27, 2021, a 31.2% increase~~26, 2022, compared to the same ~~period~~periods in the prior year. ~~The revenue~~Revenue growth ~~was primarily due~~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 ~~a strong recovery in volume from existing customers, especially those in industries hit hardest by COVID-19, such as travel and leisure, as well as~~ ~~new client wins~~. ~~Revenue trends for the business as a whole have improved compared to the fiscal first quarter of 2021, which had a revenue decline of 12.7%, compared to the same period in the prior year.~~fulfill short-term hiring needs.

Gross profit

~~Gross profit was as follows:~~


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended						Twenty-six weeks ended
(in thousands, except percentages)	(in thousands, except percentages)	Jun 27, 2021			Jun 28, 2020			Jun 27, 2021			Jun 28, 2020			(in thousands, except percentages)	Jun 26, 2022			Jun 27, 2021			Jun 26, 2022			Jun 27, 2021
Gross profit	Gross profit	$	136,468		$	83,225		$	247,042		$	209,384		Gross profit	$	158,531		$	136,468		$	298,376		$	247,042
Percentage of revenue	Percentage of revenue	26.4		%	23.2		%	25.3		%	24.5		%	Percentage of revenue	27.8		%	26.4		%	26.6		%	25.3		%

Gross profit as a percentage of revenue grew ~~320~~140 basis points to ~~26.4%~~27.8% for the thirteen weeks ended June ~~27, 2021,~~26, 2022, compared to ~~23.2%~~26.4% for the same period in the prior year. Our staffing businesses contributed 70100 basis points of ~~improvement, primarily due to a benefit~~expansion of 80which 60 basis points ~~from lower workers’ compensation expense as a result~~was attributable to higher bill rates, which have increased ahead of ~~a reduction~~pay rates. The remaining 40 basis points was primarily attributable to ~~prior year reserves largely associated with~~ favorable ~~patterns in claim development.~~customer mix. Our PeopleScout business, which is our highest margin business, is becoming a larger portion of overall sales mix, and contributed ~~250~~40 basis points of ~~the improvement, 80 basis points was due to workforce reduction costs incurred in the prior year, and the remaining 170 basis points was driven by operating leverage from higher volume in 2021.~~expansion.

Gross profit as a percentage of revenue grew 80130 basis points to ~~25.3%~~26.6% for the twenty-six weeks ended June ~~27, 2021,~~26, 2022, compared to ~~24.5%~~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 ~~compression. A non-recurring benefit~~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 ~~a reduction in expected costs~~investments we are making to ~~comply with~~replace our PeopleReady technology platform to better support our digital strategy and new service delivery models, which began during the ~~Affordable Care Act created 70 basis points~~fiscal fourth quarter of ~~compression. This compression was partially~~2021, offset by ~~30 basis points~~the reversal of ~~benefit due~~$3.3 million of accrued compensation related to ~~lower workers compensation~~the resignation of our former Chief Executive Officer. Included in SG&A expense as a result of a reduction to prior year reserves largely associated with favorable patterns in claim development. Our PeopleScout business more than offset this margin compression with an improvement of approximately 120 basis points, with 40 basis points of benefit due to workforce reduction costs incurred in the prior year ~~and~~was a benefit of $2.3 million for government employment subsidies related to the ~~remaining 80~~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 ~~benefit driven~~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 ~~operating leverage from higher volumes~~the reversal of $3.3 million of accrued compensation related to the resignation of our former Chief Executive Officer. Included in ~~2021.~~

~~SG&A expense~~

SG&A expense in the prior year was ~~as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 Jun 28, 2020 Jun 27, 2021 Jun 28, 2020
Selling, general and administrative expense $ 110,508 $ 97,200 $ 207,909 $ 214,581
Percentage of revenue 21.4 % 27.1 % 21.3 % 25.2 %
a benefit of $3.9 million for government employment subsidies related to COVID-19 relief.

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~~Total company SG&A expense~~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 ~~by $13.3 million to $110.5 million, or 21.4% of revenue~~ for the thirteen weeks ended June 27, 2021, compared to $97.2 million, or 27.1% of revenue for the same period in the prior year. Total company SG&A expense decreased by $6.7 million to $207.9 million, or 21.3% of revenue for the twenty-six weeks ended June 27, 2021, compared to $214.6 million, or 25.2% of revenue for the same period in the prior year. The prior periods include workforce reduction costs incurred as a result of COVID-19 of $8.0 million and $8.8 million for the thirteen and twenty-six weeks ended June ~~28, 2020, respectively, which represented 2.2% and 1.0% of revenue~~26, 2022 compared to the same periods in the prior year, respectively. We took steps during fiscal 2020 to reduce SG&A expense while preserving our operational strengths, to ensure the business was well-positioned for growth as economic conditions improved. Our focus on efficiently managing costs while ensuring we continue to invest in sales resources and digital strategies has allowed us to accelerate our strategic priorities and emerge stronger as the economy continues to recover.

~~Depreciation and amortization~~

~~Depreciation and amortization was as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 Jun 28, 2020 Jun 27, 2021 Jun 28, 2020
Depreciation and amortization $ 7,017 $ 7,256 $ 13,979 $ 16,350
Percentage of revenue 1.4 % 2.0 % 1.4 % 1.9 %

~~Depreciation and amortization decreased for the thirteen and twenty-six weeks ended June 27, 2021 compared to the same period in the prior year, respectively, primarily~~ due to ~~the impairment to our acquired client relationships intangible~~certain assets ~~of $34.7 million in the fiscal first quarter of 2020, which resulted in a decline in amortization expense.~~

~~Goodwill and intangible asset impairment charge~~

~~Goodwill and intangible asset impairment charge was as follows:~~

~~Thirteen weeks ended~~

~~Twenty-six weeks ended~~

~~(in thousands, except percentages)~~

~~Jun 27, 2021~~

~~Jun 28, 2020~~

~~Jun 27, 2021~~

~~Jun 28, 2020~~

~~Goodwill and intangible asset impairment charge~~

—

~~175,189~~

~~As a result of the decrease in demand for our services primarily due to the economic impact caused~~placed into service during 2021, slightly offset by ~~COVID-19, we lowered our future expectations, which was the primary trigger of an impairment of our goodwill and acquired client relationships intangible~~ assets recorded in the twenty-six weeks ended June 28, 2020. As a result of our interim impairment test in the fiscal first quarter of 2020, we concluded that the carrying amounts of goodwill for PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million. The total goodwill carrying value of $45.9 million for PeopleManagement On-Site reporting unit wasbecoming fully impaired. The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively. The impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units was $34.7 million.amortized during 2021.

Income taxes

~~The income tax expense and the effective income tax rate were as follows:~~


		Thirteen weeks ended						Twenty-six weeks ended							Thirteen weeks ended						Twenty-six weeks ended
(in thousands, except percentages)	(in thousands, except percentages)	Jun 27, 2021			Jun 28, 2020			Jun 27, 2021			Jun 28, 2020			(in thousands, except percentages)	Jun 26, 2022			Jun 27, 2021			Jun 26, 2022			Jun 27, 2021
Income tax expense (benefit)		$	3,783		$	(13,475)		$	3,671		$	(38,223)
Income tax expense														Income tax expense	$	5,129		$	3,783		$	7,105		$	3,671
Effective income tax rate	Effective income tax rate	19.2		%	62.3		%	13.9		%	19.4		%	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 ~~full year~~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)	Jun 26, 2022		%	Jun 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.

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~~The items creating a difference between income taxes computed at the statutory federal income~~WOTC, our primary hiring tax ~~rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income (Loss) are as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 % Jun 28, 2020 % Jun 27, 2021 % Jun 28, 2020 %
Income (loss) before tax expense (benefit) $ 19,667 $ (21,643) $ 26,453 $ (196,885)
Federal income tax expense (benefit) at statutory rate $ 4,130 21.0% $ (4,545) 21.0% $ 5,555 21.0% $ (41,346) 21.0%
Increase (decrease) resulting from:
State income taxes, net of federal benefit 991 5.0 (1,644) 7.6 1,279 4.8 (9,952) 5.1
Non-deductible goodwill impairment charge — — — — 21,849 (11.1)
CARES Act (574) (2.9) (3,595) 16.6 (438) (1.7) (5,698) 2.9
WOTC and other tax credits, net (669) (3.4) (3,905) 18.0 (3,406) (12.9) (3,982) 2.0
Non-deductible and non-taxable items 88 0.4 95 (0.4) 311 1.2 82 (0.1)
Stock-based compensation (25) (0.1) 119 (0.5) 266 1.0 824 (0.4)
Foreign taxes and other, net (158) (0.8) — — 104 0.5 — —
Income tax expense (benefit) $ 3,783 19.2% $ (13,475) 62.3% $ 3,671 13.9% $ (38,223) 19.4%

The difference between the statutory federal income tax rate of 21% and our effective tax rate of 13.9% for the twenty-six weeks ended June 27, 2021 was primarily due to WOTC hiring credits and additional benefits from the CARES Act, offset by state and foreign income taxes. The tax benefit of $38.2 million for the twenty-six weeks ended June 28, 2020 was primarily the result of a non-deductible goodwill and intangible asset impairment charge, WOTC hiring credits and benefits from the CARES Act. The large decrease in rates for the thirteen weeks ended June 27, 2021 when compared to the same period in the prior year was due to WOTC hiring credits and tax benefits from the CARES Act increasing our effective tax rate in the prior year when it was a benefit due to the loss from operations, and to a smaller extent reducing our tax rate in the current year when it was an expense due to the income from operations.

~~WOTC~~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 ~~has been approved~~program through the end of 2025.

On March 27, 2020 the CARES Act was enacted in the U.S. The CARES Act is an emergency economic aid package to help mitigate the impact of COVID-19. Among other things, the CARES Act provides certain changes to tax laws, including the ability to carry back current year losses to obtain refunds related to prior year tax returns with a higher federal tax rate of 35%. The net operating loss carry back benefit will vary depending on estimated results for the year.

As a result of our interim impairment test in the fiscal first quarter of 2020, we concluded that the carrying amounts of goodwill and other intangible assets for selected reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $175.2 million. Of the total impairment loss, $84.7 million (tax-effected $21.8 million) related to reporting units from stock acquisitions and accordingly were not deductible for tax purposes. The remaining impairment loss of $90.5 million (tax effected $23.3 million) related to reporting units from asset acquisitions and accordingly were deductible for tax purposes.

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.

PeopleReadysegment 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.

PeopleManagementsegment 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		%

PeopleManagement 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.

PeopleScoutsegment 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		%

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~~expense, interest, other income and expense, income taxes, and other adjustments not considered to be ongoing. See Note 10:~~ ~~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 (loss) before tax expense (benefit).

Segment profit should not be considered a measure of financial performance in isolation nor as an alternative to net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with accounting principles generally accepted in the United States of America, and may not be comparable to similarly titled measures of other companies.

~~PeopleReadysegment performance was as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 Jun 28, 2020 Jun 27, 2021 Jun 28, 2020
Revenue from services $ 299,316 $ 209,151 $ 559,708 $ 508,445
Segment profit 18,437 633 30,297 8,288
Percentage of revenue 6.2 % 0.3 % 5.4 % 1.6 %

~~PeopleReady~~PeopleScout segment profit grew ~~$17.8~~$9.7 million and ~~$22.0~~$16.7 million for the thirteen and twenty-six weeks ended June ~~27, 2021,~~26, 2022, and also improved as a percentage of revenue, compared to the same period in the prior year, respectively. PeopleReady has seen improved revenue trends across most geographies and industries, especially those in industries that were hit the hardest by COVID-19, such as construction, transportation, manufacturing and hospitality. Segment profit margin improvements benefited from lower workers’ compensation costs due to a reduction to prior year reserves largely associated with favorable patterns in claim development, higher bill rates compared to pay rates, and disciplined cost management.

~~PeopleManagementsegment performance was as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 Jun 28, 2020 Jun 27, 2021 Jun 28, 2020
Revenue from services $ 152,356 $ 118,661 $ 304,110 $ 260,275
Segment profit 3,221 1,803 6,337 1,489
Percentage of revenue 2.1 % 1.5 % 2.1 % 0.6 %

~~PeopleManagement segment profit grew $1.4 million and $4.8 million for the thirteen and twenty-six weeks ended June 27, 2021, compared to the same period~~periods in the prior year, respectively. Segment profit ~~growth was primarily~~improved as a result of operating leverage as volumes increased due to ~~improving client volumes, new client wins, operating leverage and a consistent focus on cost management.~~historically high employee turnover rates at existing clients.

~~PeopleScoutsegment performance was as follows:~~

Thirteen weeks ended Twenty-six weeks ended
(in thousands, except percentages) Jun 27, 2021 Jun 28, 2020 Jun 27, 2021 Jun 28, 2020
Revenue from services $ 64,283 $ 31,132 $ 110,843 $ 84,476
Segment profit (loss) 10,857 (2,782) 14,894 (274)
Percentage of revenue 16.9 % (8.9) % 13.4 % (0.3) %

PeopleScout segment profit grew $13.6 million and $15.2 million for the thirteen and twenty-six weeks ended June 27, 2021, compared to the same period in the prior year, respectively. The revenue growth was primarily due to a strong recovery in volume from existing customers, especially those in industries hit the hardest by COVID-19, such as travel and leisure, as well as ~~new client wins~~. ~~Segment profit improved as the result of cost management, operating leverage and increased utilization of recruiting staff.~~

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~~MANAGEMENT’S DISCUSSION AND ANALYSIS~~

FUTURE OUTLOOK

Due to the uncertainty surrounding COVID-19 and its impact on the business environment, we have limited visibility into our financial condition, results of operations or cash flows in the future. However, we believe there is value in providing highlights of our expectations for future financial performance. The following highlights represent our operating outlook for the fiscal third quarter and full year of ~~fiscal 2021.~~2022. These expectations are subject to revision as our business changes with the overall economy.

Operating outlook

•~~For~~We are not providing customary revenue guidance for the fiscal third quarter of ~~2021, we expect~~2022. Our historical third quarter sequential revenue growth ~~consistent with our pre-pandemic historical rates~~has been approximately 9% over the prior five years, excluding the fiscal third quarter of ~~9% to 11%~~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 ~~to be~~of between ~~250~~120 and ~~290~~160 basis points for the fiscal third quarter of ~~2021, and between 100 and 160 basis points for fiscal 2021,~~2022 compared to the same ~~periods~~period in the prior ~~year, respectively. These improvements are expected~~year. For fiscal 2022, we anticipate gross margin expansion of between 40 and 100 basis points, compared to ~~be driven by a continued recovery in economic growth in~~ the ~~second half of 2021 and improving revenue mix from PeopleScout, our highest margin segment. To a lesser extent, we~~prior year. We expect gross margin ~~expansion~~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 from lower worker’s compensation costs. Our workers’ compensation cost as a percent of revenue for the twenty-six weeks ended June 27, 2021 of 2% is near the low end of our historical range, and may not continue to see further declines.businesses.

•For the fiscal ~~2021,~~third quarter of 2022, we anticipate SG&A expense to be between ~~$452~~$126 million and ~~$460~~$130 million. ~~We passed~~For fiscal 2022, we anticipate SG&A expense to be between $501 million and $507 million. This includes approximately $3 million for the ~~anniversary~~fiscal third quarter of ~~the majority of~~2022 and $11 million for fiscal 2022 in costs to implement new cloud-based solutions to replace our ~~cost reduction actions in April of 2021.~~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 are also in the early stages of implementing pilot projects to further reduce the costs of our PeopleReady branch network through a greater use of technology, centralizing work activities, and repurposing of job roles, while maintaining the strength of our geographic footprint. These pilots will occur throughout 2021, and if successful, could lead to additional efficiencies in 2022.

•We expect our effective income tax rate for fiscal ~~2021~~2022 to be between ~~12%~~14% and ~~16%~~18%.

Liquidity outlook

•Capital expenditures and spending for software as a service assets for the fiscal third quarter of ~~2021 will~~2022 are expected to be approximately $14 million, and between $40 million toand $44 million for fiscal 2021. This includes build-out costs planned for our Chicago support center of approximately $4 million for the fiscal third quarter of 2021 and $10 million for fiscal 2021, of which $8 million will be reimbursed by our landlord with $2 million of the reimbursements expected in the third quarter. The reimbursements from our landlord will be reflected in operating cash flows.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.

•We generated a cash flow benefit from delayed payroll tax payments under the CARES Act of $60 million, primarily during fiscal 2020. We plan to take advantage of favorable net operating loss carryback provisions in the CARES Act by repaying this benefit in the fiscal third quarter of 2021.

•We believe the additional government spending on infrastructure projects in the American Jobs Plan, as proposed by the Biden administration, may generate additional demand for industrial staffing businesses especially within the construction, energy and transportation industries.

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LIQUIDITY AND CAPITAL RESOURCES

~~LIQUIDITY~~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 ~~flows from operating activities~~

Twenty-six weeks ended
(in thousands) Jun 27, 2021 Jun 28, 2020
Net income (loss) $ 22,782 $ (158,662)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 13,979 16,350
Goodwill and intangible asset impairment charge — 175,189
Provision for credit losses 2,094 5,923
Non-cash lease expense, net of changes in operating lease liabilities 1,124 (189)
Stock-based compensation 6,916 4,345
Deferred income taxes 652 (27,049)
Other operating activities (1,473) 2,669
Changes in operating assets and liabilities:
Accounts receivable (16,486) 111,803
Accounts payable and other accrued expenses (6,952) (22,197)
Other accrued wages and benefits 11,208 (10,809)
Deferred employer payroll taxes 2,810 15,730
Income tax receivable 1,103 (7,291)
Operating lease right-of-use asset 6,135 —
Other assets (2,495) 4,682
Workers’ compensation claims reserve (598) (5,668)
Other liabilities 6,563 (1,344)
Net cash provided by operating activities $ 47,362 $ 103,482

~~Net~~generated through our core operations is our primary source of liquidity. Our principal ongoing cash ~~provided by operating activities decreased~~needs are to ~~$47.4 million for the twenty-six weeks ended June 27, 2021, compared to $103.5 million for the same period in the prior year.~~

~~Changes to adjustments to reconcile net income to net cash provided by operating activities for the twenty-six weeks ended June 27, 2021 were primarily due to:~~

•~~Decrease in depreciation~~finance working capital, fund capital expenditures, repay outstanding Revolving Credit Facility balances, and ~~amortization expense primarily due to the impairment~~execute share repurchases. We manage working capital through timely collection of ~~amortizable intangible assets of $34.7 million during the fiscal first quarter of 2020.~~

•~~Decrease in the provision for credit losses on~~ accounts receivable, ~~primarily due to improved~~which we achieve through focused collection efforts for past due receivable balances. The provision for credit losses on accounts receivable as a percent of revenue decreased to 0.21% for the twenty-six weeks ended June 27, 2021, from 0.69% for the same periodand tightly monitoring trends in ~~the prior year.~~

•Increase in deferred income tax expense relative to the prior year benefit primarily due to the $23.3 million discrete tax benefit resulting from goodwill and intangible asset impairment charges in the fiscal first quarter of 2020.

•Decrease in other operating activities is primarily due to $2.4 million in unrealized gains on deferred compensation investments for the twenty-six weeks ended June 27, 2021 as a result of the recovering economy, as compared to $1.7 million in unrealized losses on deferred compensation investments in the prior year due to sharp declines in global equity investments.

~~Changes to operating assets and liabilities for the twenty-six weeks ended June 27, 2021 were primarily due to:~~

•~~Cash used by accounts receivable of $16.5 million was primarily due to an increase in our~~ days sales outstanding of 2.3 days as compared to prior year-end. This is primarily due to a higher percentage of receivables with longer payment terms. However, when comparing days sales outstanding to the same period in the prior year, days sales outstanding decreased 6.9 days. This was primarily due to focused collection efforts.

Cash provided by accounts receivable of $111.8 million for the twenty-six weeks ended June 28, 2020 was due to lower revenue from a decline in demand for our services and a seasonal revenue decline from the fiscal fourth quarter of 2019, resulting in a significant decrease in accounts receivable. This decrease was partially offset by an increase in

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~~our days sales outstanding of 4.1 days during the twenty-six weeks ended June 28, 2020, caused by a mix of clients with longer~~outstanding. While client payment terms ~~and payment delays from certain clients that were severely impacted by COVID-19.~~

•~~Cash used for accounts payable and accrued expenses of $7.0 million was primarily due to~~are generally 90 days or less, we pay our associates weekly, so additional financing through the ~~timing of payments to our workers’ compensation insurance carrier.~~

•Cash provided by other accrued wages and benefits of $11.2 million was primarily due to the timing of payroll tax payments, as well as lower accrued associate wages at the prior year end due to the holiday week.

•Cash provided by the deferral of employer payroll taxes of $2.8 million and $15.7 million for the twenty-six weeks ended June 27, 2021 and June 28, 2020, respectively, as allowed by the CARES Act. This act allowed for the deferral of the employer portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees. We anticipate the deferred amount of $59.9 million will be paid by September 15, 2021.

•~~Cash provided by operating lease right-of-use asset of $6.1 million represents reimbursable costs we incurred for the build-out~~use of our ~~Chicago~~Revolving Credit Facility is sometimes necessary to support ~~center, that were collected from our landlord during the twenty-six weeks ended June 27, 2021.~~revenue growth. We also manage working capital through efficient cost management and strategically timing payments of accounts payable.

•~~Cash provided by other liabilities of $6.6 million was primarily due to advanced payments from clients within our PeopleScout business.~~

•Cash used for workers’ compensation claims reserves was $0.6 million. Our worker safety programs have had a positive impact and have created favorable adjustments to our workers’ compensation liabilities recorded in prior periods, which more than offset the increase in reserves in the current year as contingent labor services increase.

~~Cash flows from investing activities~~

Twenty-six weeks ended
(in thousands) Jun 27, 2021 Jun 28, 2020
Capital expenditures $ (19,868) $ (11,641)
Purchases and sales of restricted investments 15,581 5,574
Net cash used in investing activities $ (4,287) $ (6,067)

~~Net cash used in investing activities was $4.3 million for the twenty-six weeks ended June 27, 2021, compared to $6.1 million for the same period in the prior year.~~

~~Capital expenditures for the twenty-six weeks ended June 27, 2021 include build-out costs for our Chicago support center of $6.4 million, as well as our continued investment in software technology.~~ We remain committed to technological innovation to transform our business for a digital ~~future that makes it easier for our clients~~future. As part of executing this strategy, we continue to ~~do business with us and easier to connect people to work. We continue making~~make investments in online and mobile apps to improve access to ~~workers~~associates and candidates, as well as to improve the speed and ease of connecting our clients and ~~workers~~associates for our staffing ~~businesses,~~business, and candidates for our RPO business. We expect these investments will increase the competitive differentiation of our services over the ~~long-term,~~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. ~~Examples include~~In addition, we continue to transition our ~~JobStack mobile app in~~back-office technology from on-premise software platforms to cloud-based software solutions, to increase automation and the efficiency of running our ~~PeopleReady business and our Affinix talent acquisition technology in our PeopleScout~~ business.

~~Restricted investments consist~~Outside of ~~collateral that has been provided or pledged to insurance carriers and state workers’ compensation programs, as well as collateral~~ongoing cash needed to support the deferred compensation plan. Purchases of restricted investments decreased $11.5 million during the twenty-six week periods ended June 27, 2021, as compared to the same period in the prior year, primarily due to changes in the timing of collateral contributions as required bycore operations, our ~~insurance carriers.~~

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~~Cash flows from financing activities~~

Twenty-six weeks ended
(in thousands) Jun 27, 2021 Jun 28, 2020
Purchases and retirement of common stock $ — $ (52,346)
Net proceeds from employee stock purchase plans 538 536
Common stock repurchases for taxes upon vesting of restricted stock (2,686) (1,956)
Net change in revolving credit facility — 7,900
Other (188) (1,344)
Net cash used in financing activities $ (2,336) $ (47,210)

~~Net cash used in financing activities was $2.3 million for the twenty-six weeks ended June 27, 2021, compared to $47.2 million for the same period in the prior year.~~

Net cash used in financing activities of $47.2 million for the twenty-six weeks ended June 28, 2020, was due to the repurchase of $40.0 million of our common stock under an accelerated share repurchase program and $12.4 million of our common stock in the open market for a total of $52.4 million of common stock. This net use was slightly offset by our draw on our Revolving Credit Facility.

~~CAPITAL RESOURCES~~

~~Revolving credit facility~~

~~Under our Revolving Credit Facility, which matures on March 16, 2025, we have the ability to increase our borrowing from $300 million up to $450 million, subject to bank approval.~~

~~The following temporary financial covenants, as defined in the second and third amendments to our credit agreement, were in effect through the fiscal second quarter of 2021:~~

•Asset Coverage Ratio of greater than 1.00, defined as the ratio of 60% of accounts receivable to the difference of total debt outstanding and unrestricted cash in excess of $50 million, subject to certain minimums. As of June 27, 2021, our asset coverage ratio was 28.8.

•~~Liquidity greater than $150 million, defined as the sum of unrestricted cash and availability under the aggregate revolving commitments. As of June 27, 2021, our liquidity was $399.1 million.~~

•EBITDA, as defined in the amended credit agreement, greater than $15 million for the trailing four quarters ending Q2 2021. As of June 27, 2021, EBITDA for the trailing four quarters was $93.1 million.

The following financial covenants, as defined in the second amendment to our credit agreement, will replace the prior temporary financial covenants and are in effect starting the fiscal third quarter of 2021 and thereafter:

•Consolidated leverage ratio less than 4.00 for the third and fourth quarters of 2021 and less than 3.00 thereafter, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the amended credit agreement. Although not in effect as of June 27, 2021, our consolidated leverage ratio was 0.1.

•Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense. Although not in effect as of June 27, 2021, our consolidated fixed charge ratio was 49.7.

~~Workers’ compensation insurance, collateral and reserves~~

~~Workers’ compensation insurance~~

We provide workers’ compensation insurance for our associates and permanent employees. The majority of our current workers’ compensation insurance policies cover claims for a particular event above a $2.0 million deductible limit, on a “per occurrence” basis and, accordingly, we are substantially self-insured.

For workers’ compensation claims originating in Washington, North Dakota, Ohio, Wyoming, Canada and Puerto Rico (our “monopolistic jurisdictions”), we pay workers’ compensation insurance premiums and obtain full coverage under government-administered programs (with the exception of PeopleReady in Ohio where we have a self-insured policy). Accordingly, because

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~~we are not the primary obligor, our consolidated financial statements do not reflect the liability for workers’ compensation claims in these monopolistic jurisdictions.~~

~~Workers’ compensation collateral and restricted cash and investments~~

~~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. ~~The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and surety bonds.~~ 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 ~~majority~~collateral typically takes the form of ~~the restricted~~cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and surety bonds. Restricted cash and investments ~~collateralizing~~supporting our self-insured workers’ compensation ~~policies~~obligation are held in a trust at the Bank of New York Mellon (“Trust”).

~~Our total collateral commitments were made up of the following components for the fiscal period end dates presented:~~

(in thousands) Jun 27, 2021 Dec 27, 2020
Cash collateral held by workers’ compensation insurance carriers $ 22,609 $ 22,253
Cash and cash equivalents held in Trust 26,344 29,410
Investments held in Trust 135,894 152,247
Letters of credit 6,095 6,095
Surety bonds (1) 20,831 20,616
Total collateral commitments $ 211,773 $ 230,621

~~(1)Our surety bonds~~, and are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which is determined by each independent surety carrier. These fees do not exceed 2.0% of the bond amount, subjectused to ~~a minimum charge. The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.~~

Total collateral commitments decreased $18.8 million during the twenty-six week period ended June 27, 2021 primarily due to timing of collateral contributions as required by our insurance carriers and the use of collateral to satisfypay workers’ compensation ~~claims.~~

At June 27, 2021, we had restricted cash and investments totaling $224.6 million. Restricted cash and investments consist principally of collateral that has been provided or pledged to insurance carriers for workers’ compensation and state workers’ compensation programs. We have agreements with certain financial institutions that allow us to restrict cash and cash equivalents and investments for the purpose of providing collateral instruments to our insurance carriers to satisfy workers’ compensation claims. The majority of our collateral obligationsclaims as they are ~~held in a Trust.~~filed. See Note 35:: 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.~~ 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

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~~Workers’ compensation reserve~~

~~The following table provides a reconciliation of our~~Total collateral commitments ~~to our workers’ compensation reserve as of the fiscal period end dates presented:~~

(in thousands) Jun 27, 2021 Dec 27, 2020
Total workers’ compensation reserve $ 254,895 $ 255,493
Add back discount on workers’ compensation reserve (1) 16,942 18,009
Less excess claims reserve (2) (58,586) (54,019)
Reimbursable payments to insurance provider (3) 3,531 6,373
Other (4) (5,009) 4,765
Total collateral commitments $ 211,773 $ 230,621

~~(1)Our workers’ compensation reserves are discounted to their estimated net present value while our collateral commitments are based on the gross, undiscounted reserve.~~

~~(2)~~Excess claims reserve includes the estimated obligation for claims above our deductible limits. These are the responsibility of the insurance carriers against which there are no collateral requirements.

~~(3)~~This amount is included in restricted cash and represents a timing difference between claim payments made by our insurance carrier and the reimbursement from cash held in the Trust. When claims are paid by our carrier, the amount is removed from the workers’ compensation reserve but not removed from collateral until reimbursed to the carrier.

~~(4)Represents the difference between the self-insured reserves and collateral commitments.~~

Our workers’ compensation reserve is established using estimates of the future cost of claims and related expenses, which are discounted to their estimated net present value. We discount our workers’ compensation liability as we believe the estimated future cash outflows are readily determinable.

Our workers’ compensation reserve for deductible and self-insured claims is established using estimates of the future cost of claims and related expenses that have been reported but not settled, as well as those that have been incurred but not reported. Reserves are estimated for claims incurred in the current year, as well as claims incurred during prior years.

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered in establishing and adjusting these reserves include, among other things:

•~~changes in medical and time loss (“indemnity”) costs;~~

•~~changes in mix between medical only and indemnity claims;~~

•~~regulatory and legislative developments impacting benefits and settlement requirements;~~

•~~type and location of work performed;~~

•~~the impact of safety initiatives; and~~

•~~positive or adverse development of claims, which considers the potential impact of COVID-19.~~

Our workers’ compensation claims reserve for claims below the deductible limit is discounted to their estimated net present value using discount rates based on returns of “risk-free” U.S. Treasury instruments with maturities comparable to the weighted average lives of our workers’ compensation claims. At June 27, 2021, the weighted average discount rate was 1.7%. The claim payments are made over an estimated weighted average period of approximately 5.5 years.

Our workers’ compensation reserve includes estimated expenses related to claims above our self-insured limits (“excess claims”), and a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance carriers. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns of “risk-free” U.S. Treasury instruments availabledecreased $7.6 million during the ~~year in which the liability was incurred. At~~twenty-six week period ended June ~~27, 2021, the weighted average rate was 1.4%. The claim payments are made and the corresponding reimbursements~~26, 2022 primarily due to lower collateral requirements from our insurance carriers ~~are received over an estimated weighted average period~~and the use of ~~approximately 17 years. The discounted~~collateral to satisfy workers’ compensation ~~reserve~~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 excess claims was $58.6 million and $54.0 million, as of June 27, 2021 and December 27, 2020, respectively. The discounted receivables from insurance companies, net of valuation allowance, were $57.2 million and $52.9 million as of June 27, 2021 and December 27, 2020, respectively.

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.

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~~FUTURE OUTLOOK~~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.

WeA summary of our cash flows for each period are ~~providing~~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 ~~following future liquidity~~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 ~~resources outlook~~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 ~~third~~ ~~quarter and full year~~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:~~2021.

•~~We expect~~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 ~~strong financial position~~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 ~~provide ample liquidity. At June 27, 2021, we had no debt outstanding on~~the repurchase of $60.9 million of our Revolving Credit Facility leaving $294 million unused under the Revolving Credit Facility, resulting in $170 million available for additional borrowings based on our most restrictive covenant. We have an option to increase the total line of credit amount from $300 million to $450 million, subject to bank approval.

•We generated a cash flow benefit from delayed payroll tax payments under the CARES Act of $60 million, primarily during fiscal 2020. We plan to take advantage of favorable net operating loss carryback provisionscommon stock in the ~~CARES Act by repaying this benefit in the third quarter of 2021.~~

•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. The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit, and surety bonds. We continue to have risk that these collateral requirements may be increased by our insurers due to our loss history and market dynamics, including from the impact of COVID-19.

•open market. As of June ~~27, 2021, $67~~26, 2022, $89.1 million remains available for repurchase ~~of common stock~~ under existing authorizations. ~~We have historically returned capital to shareholders through stock repurchases.~~

•~~We believe that cash provided from operations and our capital resources will be adequate to meet our cash requirements for the next 12 months.~~

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 ~~27, 2020.~~26, 2021.

Goodwill and indefinite-lived intangible assets

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environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, orchanges in the carrying amount of net assets, sale or disposition of a significant portion of a reporting ~~unit.~~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, ~~Staff Management, SIMOS,~~ PeopleScout RPO and PeopleScout MSP. ~~The~~

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. ~~Our weighted average cost of capital for our most recent annual impairment test ranged from 11.0% to 12.0%.~~ We also apply a market approach, which ~~identifies similar~~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. ~~The income~~

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.

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 ~~approaches were equally weighted in our most recent annual~~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. These combined fair~~test is unnecessary.

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~~values are reconciled to our aggregate market value of our shares of common stock outstanding on the date of valuation, resulting in a control premium of 23.2%.~~

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 consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater. All reporting units’ fair values were substantially in excess of their respective carrying values. Accordingly, there was noThe quantitative impairment ~~loss was recognized for the twenty-six weeks ended June 27, 2021.~~

~~Indefinite-lived intangible assets~~

~~We have indefinite-lived intangible assets related to our Staff Management and PeopleScout trade names. We~~ test, ~~our trade names annually for impairment, and when indicators of potential impairment exist. We utilize~~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 ~~indefinite-lived intangible asset~~ impairment test for ~~2021, and determined~~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 ~~estimated~~ fair ~~values exceeded the carrying amounts for~~value of our indefinite-lived ~~trade names.~~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 ~~27, 2021.~~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.


Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 ~~27, 2020.~~26, 2021, and have not changed materially.


Item 4.			CONTROLS AND PROCEDURES

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 second quarter of ~~2021,~~2022, 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 June ~~27, 2021.~~26, 2022.

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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PART II. OTHER INFORMATION


Item 1.			LEGAL PROCEEDINGS

See Note 6:7: Commitments and Contingencies, to our consolidated financial statements found in Part I, Item 1 of this Quarterly Report on Form 10-Q.


Item 1A.			RISK FACTORS

Investing in our securities involves risk. The following risk factors and all other information set forth in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December ~~27, 2020~~26, 2021 should be considered in evaluating our future prospects. If any of the events described below occur, our business, financial condition, results of operations, liquidity, or access to the capital markets could be materially and adversely affected.

To develop the following risk factors, we review risks to our business that are informed by our formal Enterprise Risk Management program, industry trends, the external market, and financial environment as well as dialogue with leaders throughout our organization. Our risk factors descriptions are intended to convey our assessment of each applicable risk and such assessments are prioritized and integrated into our strategic and operational planning.

RISKS RELATED TO OUR COMPANY’S OPERATIONS

COVID-19 and the resulting governmental reactions to COVID-19 ~~and the resulting adverse economic conditions~~ have negatively impacted our business and ~~will~~could have a continued material adverse impact on our business, financial condition, liquidity and results of operations.

COVID-19’s negative impacts on the global economy and related governmental responses have been wide-ranging and multi-faceted. These impacts caused rapid declines in economic activity in the markets where we operate, disruptions in global supply chains, travel restrictions, sharp downturns in business activity, price volatility in equity markets, changes to the labor market, and concern that credit markets and companies will not remain liquid.

~~COVID-19~~The coronavirus pandemic (“COVID-19”) caused significant negative impacts on our operations and stock price. Our revenue declined substantially beginning in ~~the second half of March~~early 2020 because of COVID-19 and may ~~remain suppressed~~continue to be impacted while economic conditions return to pre-pandemic levels. The operations of our clients have been severely disrupted, and could remain depressed, thereby increasing the likelihood that our clients continue to delay new contracts or cancel current contracts, reduce orders for our services in the future, have difficulty paying for services provided, or cease operations altogether. In response to these adverse conditions, we reduced our expenses and cash outflows during 2020. These reductions in expenses, including layoffs, could reduce our ability to take advantage of opportunities as economic conditions improve.normalize post-pandemic. Further deterioration in economic conditions, as a result of COVID-19 or otherwise, ~~will~~could lead to a prolonged decline in demand for our services and negatively impact our business.

The extent to which COVID-19, including any variants, ~~continues~~could continue to adversely impact our business depends on future developments of the pandemic and related governmental responses ~~such as the efficacy, distribution, and adoption of the COVID-19 vaccines, which are both uncertain and unpredictable.~~to those developments. While this matter has, and we expect it to continue to, negatively impact our results of operations, cash flows, profit margins, and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related future financial impact is difficult to estimate at this time. ~~In addition, we cannot guarantee that actions we take to reduce costs or otherwise change our operations will address the issues we face with clients, employees or our results of operations.~~

Advances in technology may disrupt the labor and recruiting ~~markets and we must~~markets. Failure to constantly improve our technology to meet the expectations of clients, associates, candidates and ~~employees.~~employees could have a negative impact on our financial position and results of operations.

The increased use of internet-based and mobile technology is attracting additional technology-oriented companies and resources to our industry. Our associates, candidates and clients increasingly demand technological innovation to improve the access to and delivery of our services. Our clients increasingly rely on automation, artificial intelligence, machine learning and other new technologies to reduce their dependence on labor needs, which may reduce demand for our services and impact our operations. We face extensive pressure for lower prices and new service offerings and must continue to invest in and implement new technology and industry developments in order to remain relevant to our ~~clients~~associates, candidates and ~~candidates.~~clients. As a result of this increasing dependence upon technology, we must timely and effectively identify, develop, or license technology from third parties, and integrate such enhanced or expanded technologies into the solutions that we provide. In addition, our business relies on a variety of technologies, including those that support recruiting, hiring, paying, order management, billing, collecting, associate data analytics and client data analytics. If we do not sufficiently invest in and implement new technology, or evolve our business at sufficient speed and scale, our business results may decline materially. Acquiring technological talent and expertise ~~and developing~~to develop new technologies for our business may require us to incur significant expenses and capital costs. For some solutions, we depend on key vendors and partners to provide technology and support. If these third parties fail to perform their obligations or cease to work with us, our business operations could be negatively affected.

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We are dependent on obtaining workers’ compensation and other insurance coverage at commercially reasonable terms. Unexpected changes in claim trends on our workers’ compensation or an inability to obtain appropriate insurance coverage may negatively impact our financial condition.

Our temporary staffing services employ associates for which we provide workers’ compensation insurance. Our workers’ compensation insurance policies are renewed annually. The majority of our insurance policies are with AIG. Our insurance carriers require us to collateralize a significant portion of our workers’ compensation obligation. The majority of our collateral is held in trust by a ~~third party~~third-party for the payment of these claims. The loss or decline in the value of our collateral could require us to seek additional sources of capital to pay our workers’ compensation claims. As our business grows or financial results deteriorate, we have seen the amount of collateral required increase and the timing of providing collateral accelerate, which could occur again in the future. Resources to meet these requirements may not be available. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms. The loss of our workers’ compensation insurance coverage would prevent us from operating as a staffing services business in the majority of our markets. Further, we cannot be certain that our current and former insurance carriers will be able to pay claims we make under such policies.

We self-insure, or otherwise bear financial responsibility for, a significant portion of expected losses under our workers’ compensation program. We have experienced unexpected changes in claim trends, including the severity and frequency of claims, changes in state laws regarding benefit levels and allowable claims, actuarial estimates, and medical cost inflation, and may experience such changes in the future which could result in costs that are significantly different than initially anticipated or reported and could cause us to record ~~different~~adjustments to the reserves in our financial statements. There is a risk that we will not be able to increase the fees charged to our clients in a timely manner and in a sufficient amount to cover increased costs as a result of any changes in claims-related liabilities.

We actively manage the safety of our associates through our safety programs and actively control costs with our network of workers’ compensation related service providers. These activities have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the current and prior periods. The benefit of these adjustments is likely to decline and there can be no assurance that we will be able to continue to reduce accident rates and control costs to produce these results in the future.

Some clients require extensive insurance coverage and request insurance endorsements that are not available under standard policies. There can be no assurance that we will be able to negotiate acceptable compromises with clients or negotiate appropriate changes in our insurance contracts. An inability to meet client insurance requirements may adversely affect our ability to take on new clients or continue providing services to existing clients.

~~We may experience employment-related claims, commercial indemnification claims~~Demand for our workforce solutions is significantly affected by fluctuations in general economic conditions.

The demand for our workforce solutions is highly dependent upon the state of the economy and ~~other legal proceedings that could materially harm our business.~~

~~We are in~~ the business of employing people in the workplaces of our clients. We incur a risk of liability for claims relating to personal injury, wage and hour violations, immigration, discrimination, harassment and other liabilities arising from the actionsworkforce needs of our clients, which creates uncertainty and ~~associates. Some~~volatility in our operations. National and global economic activity is slowed by many factors, including rising interest rates, inflation, political and legislative changes, international conflict or ~~all~~instability, epidemics, other significant health concerns, and global trade uncertainties. As economic activity slows, companies tend to reduce their use of ~~these claims may give rise~~associates and recruitment of new employees. We work in a broad range of industries that primarily include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, energy, retail and hospitality. Significant declines in demand from any region or industry in which we have a major presence, domestic or global supply chain disruptions, or decline in the financial health of our clients, significantly decreases our revenues and profits. For example, we experienced significantly reduced demand from our clients due to ~~negative publicity, investigations, litigation~~COVID-19. Deterioration in economic conditions or ~~settlements, which may cause~~the financial or credit markets could also have an adverse impact on our clients’ financial health or their ability to pay for services we have already provided.

It is difficult for us to ~~incur costs~~forecast future demand for our services due to the inherent uncertainty in forecasting the direction and strength of economic cycles and the project nature of our staffing assignments. The uncertainty can be exacerbated by volatile economic conditions, which has caused and may continue to cause clients to reduce or ~~have other material adverse impacts on~~defer projects for which they utilize our ~~financial statements.~~

~~We may have liability~~services. The negative impact to our ~~clients~~business can occur before, during or after a decline in economic activity is seen in the broader economy. When it is difficult for ~~the action or inaction of our employees, that~~us to accurately forecast future demand, we may cause harm to our clients or third parties. In some cases, we must indemnify our clients for certain acts of our associates or arising from our associates presence on the client’s job site and certain clients have negotiated broad indemnification provisions. We may also incur fines, penalties, and losses that are not ~~covered by insurance or negative publicity with respect to these matters.~~

~~We maintain insurance with respect to some potential claims and costs with deductibles. We cannot be certain we will~~ be able to ~~obtain appropriate types or levels~~determine the optimal level of ~~insurance~~personnel and investment necessary to profitably manage our business in the future or that adequate replacement policies will be available on acceptable terms. Should the final judgments or settlements exceed our insurance coverage, they could have a material adverse effect on our business. Our ability to obtain insurance, its coverage levels, deductibleslight of opportunities and ~~premiums, are all dependent on market factors, our loss history, and insurance providers’ assessments~~risks we face.

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Table of ~~our overall risk profile. Further, we cannot be certain our current and former insurance carriers will be able to pay claims we make under such policies.~~Contents

The loss of, continued reduction in or substantial decline in revenue from larger clients or certain industries could have a material adverse effect on our revenues, profitability and liquidity.

We experience revenue concentration with large clients and in certain industries. Generally, our contracts do not contain guarantees of minimum duration, revenue levels, or profitability. Our clients have in the past and could in the future terminate their contracts or materially reduce their requested levels of service at any time. Although we have no client that represents over 10% of our consolidated revenue, there are a few clients that ~~may~~ exceed 10% of revenues within some of our ~~operating~~

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reportable segments. The deterioration of the financial condition of a large client or a particular industry could have a material adverse effect on our business, financial condition, and results of operations. COVID-19 and supply chain shortages have caused certain clients to temporarily close large job sites or reduce demand for our services, and future outbreaks of the pandemic, or other unforeseen disruptions, could cause large closures and long-term reduction in demand. In addition, a significant change to the business, staffing, or recruiting model of these clients, for example a decision to ~~in-source~~insource our services, has had, and could again have, a material adverse effect on our business, financial condition, and results of operations. ~~The loss of, or reduced~~Reduced demand for our services from larger clients ~~and~~or certain industries, such as ~~construction or~~renewed restrictions on travel and leisure ~~has~~or supply interruptions for manufacturing, have had, and in the future could have, a material adverse effect on our business, financial condition, and results of operations. Client concentration exposes us to concentrated credit risk, as a significant portion of our accounts receivable may be from a small number of clients. If we are unable to collect our receivables, or are required to take additional reserves, our results and cash flows will be adversely affected.

Our business and operations have undergone, and will continue to undergo, significant change as we seek to improve our operational and support effectiveness, which if not managed effectively could have an adverse outcome on our business and results of operations.

We have significantly changed our operations and internal processes in recent periods, and we will continue making similar changes to improve our operational effectiveness. These efforts strain our systems, management, administrative, operations and financial infrastructure. For example, we ~~combined some~~are conducting pilot projects to further reduce the costs of our ~~operating segments in~~PeopleReady branch network through a greater use of technology, centralizing work activities, and repurposing of job roles, while maintaining the ~~prior year.~~strength of our geographic footprint. We believe these efforts are important to our long-term success. Managing and cascading these changes throughout the company will continue to require the further attention of our management team and refinements to our operational, financial and management controls, reporting systems and procedures. These activities will require ongoing expenditures and allocation of valuable management and employee resources. If we fail to manage these changes effectively, our costs and expenses may increase more than we expect and our business, financial condition, and results of operations may be harmed.

New business initiatives may cause us to incur additional expenditures and could have an adverse effect on our business.

We expect to continue adjusting the composition of our business segments and entering into new business initiatives as part of our business strategy. New business initiatives, strategic business partners, or changes in the composition of our business mix can be distracting to our management and disruptive to our operations, causing our business and results of operations to suffer materially. New business initiatives, including initiatives outside of our workforce solutions business, in new markets, or new geographies, could involve significant unanticipated challenges and risks including not advancing our business strategy, not realizing our anticipated return on investment, experiencing difficulty in implementing initiatives, or diverting management’s attention from our other businesses. In particular, we are making significant investments to advance our technology, and we cannot be sure that those initiatives will be successful, will not interrupt our operations, or that we will achieve a return on our investment. These events could cause material harm to our business, operating results or financial condition.

~~Failure to protect our intellectual property could harm our business, and we face the risk that our services or products may infringe upon the intellectual property rights of others.~~

We have invested in developing specialized technology and intellectual property, proprietary systems, processes and methodologies that we believe provide us a competitive advantage in serving clients. We cannot guarantee that trade secret, trademark, and copyright law protections are adequate to deter misappropriation of our intellectual property, which is an important part of our business. We may be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our rights. We cannot be sure that our services and products, or the products of others that we offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or our clients. These claims may harm our reputation, result in financial liability and prevent us from offering some services or products to clients.

~~We are at risk of damage~~Damage to our brands and reputation ~~which is important to~~could have an adverse effect on our ~~success.~~business.

Our ability to attract and retain clients, associates, candidates and employees is affected by external perceptions of our brands and reputation. Negative perceptions or publicity could damage our reputation with current or ~~perspective~~prospective clients, associates, candidates and employees. Negative perceptions or publicity regarding our employees, business practices, vendors, clients, or business partners may adversely affect our brand and reputation. We may not be successful in detecting, preventing, or negating all changes in or impacts on our ~~reputation.~~reputation, including reputational effects of negative social media use by our clients, employees, or associates. If any factor, including poor performance or negative publicity, whether or not true, hurts our reputation, we may experience negative repercussions which could harm our business.

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~~The expansion~~We may not achieve the intended effects of ~~social media platforms creates new~~our business strategy which could negatively impact our results.

Our business strategy focuses on driving growth in our PeopleReady, PeopleManagement and PeopleScout business segments by investing in innovative technology and initiatives which drive organic growth. These investments may not achieve our desired results or may be impacted by matters outside of our control. If we are unsuccessful in executing any of these strategies, we may not achieve our goal of revenue and profit growth, which could negatively impact financial results.

Outsourcing certain aspects of our business could result in disruption and increased costs.

We have outsourced certain aspects of our business to third-party vendors. These relationships subject us to significant risks including disruptions in our business and ~~challenges that could cause damage~~increased costs. For example, we license software from third parties, much of which is central to our ~~brand~~systems and ~~reputation.~~

The use of social media platforms, including social media websites and other forms of internet-based communications, has rapidly increased allowing individuals access to a broad audience of consumers and other interested parties. For example, unfavorable comments about a work site could make recruiting or hiring at that site more challenging. The inappropriate or unauthorized use of such platforms by our clients, employees or associates could violate privacy laws, cause damage to our brand, or lead to litigation which could harm our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated, or if any of these parties were to cease doing business or supporting the applications we currently utilize, our business could be disrupted and we may be forced to spend significant time and money to replace the licensed software. In addition, we have engaged third parties to host and manage certain aspects of our data center, information and technology infrastructure, mobile apps, and electronic pay solutions, to provide certain back office support activities, and to support business process outsourcing for our clients. We are subject to the risks associated with the vendors’ inability to provide these services in a manner that meets our needs and the risks associated with changing vendors or in sourcing these aspects of our business. If the cost of these services is more than expected, if the vendors suddenly cease providing their services, if we or the vendors fail to adequately protect our data and information is lost or compromised, or if our ability to deliver our services is interrupted, then our business and results of operations may be negatively impacted.

RISKS RELATED TO OUR FINANCIAL POSITION

We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term shareholder value.

Our Board of Directors (the “Board”) has authorized a share repurchase program. Under the program, we are authorized to repurchase shares of common stock for a set aggregate purchase price, or we may choose to purchase shares in the open market, from individual holders, through an accelerated share repurchase ~~program~~agreement or otherwise. Although the Board has authorized a share repurchase program, the share repurchase program does not obligate the company to repurchase any specific dollar amount or to acquire any specific number of shares. The timing and amount of the repurchases, if any, will be determined at management’s discretion and depend upon several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. In addition, repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. The existence of a share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. There can be no assurance that these share repurchases will enhance shareholder value because the market price of our common stock may decline below the level at which we repurchased shares of stock. Although our share repurchase program is intended to enhance long-term shareholder value, there is no assurance that it will do so and short-term stock price fluctuations could reduce the program’s effectiveness.

Our level of debt and restrictions in our credit agreement could negatively affect our operations and limit our liquidity and our ability to react to changes in the economy.

Our revolving credit agreement (“Revolving Credit ~~Facility~~Facility”) contains restrictive covenants that require us to maintain certain financial conditions, which we may fail to meet if there is a material decrease in our profitability, including as a result of COVID-19. Our failure to comply with these restrictive covenants could result in an event of default, which, if not cured or waived, would require us to repay these borrowings before their due date. We may not have sufficient funds on hand to repay these loans, and if we are forced to refinance these borrowings on less favorable terms, or are unable to refinance at all, our results of operations and financial condition could be materially adversely affected by increased costs and rates.

Our principal sources of liquidity are funds generated from operating activities, available cash and cash equivalents, and borrowings under our Revolving Credit Facility. We must have sufficient sources of liquidity to meet our working capital requirements, fund our workers’ compensation collateral requirements, service our outstanding indebtedness, and finance investment opportunities. Without sufficient liquidity, we could be forced to curtail our operations or we may not be able to pursue promising business opportunities.

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If our debt level significantly increases in the future, ~~debt levels increase,~~ it could have significant consequences for the operation of our business including requiring us to dedicate a significant portion of our cash flow from operations to servicing our debt rather than using it for our operations; limiting our ability to obtain additional debt financing for future working capital, capital expenditures, or other corporate purposes; limiting our ability to take advantage of significant business opportunities, such as acquisitions; limiting our ability to react to changes in market or industry conditions; and putting us at a disadvantage compared to competitors with less debt.

We may have additional tax liabilities that exceed our estimates.

We are subject to federal taxes, a multitude of state and local taxes in the United States (“U.S.”), and taxes in foreign jurisdictions. We face continued uncertainty surrounding ongoing hiring tax credits we utilize, and for the recent business tax incentives related to measures taken to soften the impact of COVID-19. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. We are regularly subject to audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation with tax authorities could materially harm our business. Changes in interpretation of existing laws and regulations by a taxing authority could result in penalties and increased costs in the future. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing intercompany arrangements or may change their laws, which could increase our worldwide effective tax rate and harm our financial position and results of operations.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.

If our management is unable to certify the effectiveness of our internal controls, including those over our third-party vendors, our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny, a loss of public confidence and litigation. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause our stock price to decline.

LEGAL AND COMPLIANCE RELATED RISKS

We may experience employment-related claims, commercial indemnification claims and other legal proceedings that could materially harm our business.

We incur a risk of liability for claims relating to personal injury, wage and hour violations, immigration, discrimination, harassment, securities law matters, and other claims. Some or all of these claims may give rise to negative publicity, investigations, litigation or settlements, which may cause us to incur costs or have other material adverse impacts on our financial statements. Additionally, new employment and labor laws and regulations may be proposed or adopted that may increase the potential exposure of employers to employment-related claims and litigation.

We may have liability to our clients for the action or inaction of our employees that may cause harm to our clients or third parties. In some cases, we must indemnify our clients for certain acts of our associates or arising from our associates’ presence on the client’s job site and certain clients have negotiated broad indemnification provisions. We may also incur fines, penalties, and losses that are not covered by insurance or negative publicity with respect to these matters.

We maintain insurance with respect to some potential claims and costs with deductibles. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms. Should the final judgments or settlements exceed our insurance coverage, they could have a material adverse effect on our business. Our ability to obtain insurance, its coverage levels, deductibles and premiums, are all dependent on market factors, our loss history, and insurance providers’ assessments of our overall risk profile. Further, we cannot be certain our current and former insurance carriers will be able to pay claims we make under such policies.

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Failure to protect our intellectual property could harm our business, and we face the risk that our services or products may infringe upon the intellectual property rights of others.

Failure to maintain adequate compliance policies and controls may not prevent violations that could result in significant fines and penalties.

We could be exposed to fines and penalties under U.S., foreign, or local jurisdictions for failure to adequately monitor changes in operating requirements, including rules related to the employment and recruiting of associates and candidates. Failure to comply with laws in a particular market may result in substantial liability and could have a significant and negative effect not only on our business in that market, but also on our reputation generally. Although we have implemented policies and procedures designed to monitor and ensure compliance with these various regulations, we cannot be sure that our employees, contractors, vendors, or agents will not violate such policies. Any such violations could materially damage our reputation, brand, business and operating results.

RISKS RELATED TO OUR INDUSTRY

Our workforce solutions are subject to extensive government regulation and the imposition of additional regulations, which could materially harm our future earnings.

Our workforce solutions are subject to extensive federal, state, local and international government regulation. The cost to comply, and any inability to comply with government regulation, could have a material adverse effect on our business and financial results. Increases or changes in government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially harm our business.

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~~Our temporary staffing businesses employ associates.~~ The wage rates we pay to associates are based on many factors including government-mandated increases to minimum wage requirements, payroll-related taxes and benefits. If we are not able to increase the fees charged to clients to absorb any increased costs related to these factors, our results of operations and financial condition could be adversely affected.

We may be unable to attract sufficient qualified associates and candidates to meet the needs of our clients.

We compete to meet our clients’ needs for workforce solutions; therefore, we must continually attract qualified associates and candidates to fill positions. Attracting qualified associates and candidates depends on factors such as desirability of the assignment, position requirements, location, the associated wages and other benefits. Many of these factors are outside of our control, including the reputational effects of unfavorable comments on social media outlets about our business or a work site. Prior to COVID-19, unemployment in the U.S. was low, making it challenging to find sufficient eligible associates and candidates to meet our clients’ orders. Government responses to COVID-19, including generous unemployment benefits, stimulus payments and other direct payments to individuals, have negatively impacted our ability to recruit qualified associates and candidates, and may continue to impact our recruiting efforts in the future. Continued similar benefits will further impact our ability to recruit in the future. Client requirements or governmental mandates for our associates or candidates to be vaccinated against or periodically tested for COVID-19 could cause qualified associates or candidates to avoid work or seek alternative employers.

We have experienced shortages of qualified associates and candidates and may experience such shortages in the future. Such a shortage of associates and candidates can increase the cost to employ or recruit these individuals, cause us to be unable to fulfill our clients’ needs, and otherwise negatively impact our business. If general market conditions or wage inflation increase the wage rates required to attract and retain associates, and we are unable to pass those costs through to our clients, it could materially and adversely affect our business. Organized labor periodically engages in efforts to represent various groups of our associates. If we are subject to unreasonable collective bargaining agreements or work disruptions, our business could be adversely affected.

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We operate in a highly competitive industry and may be unable to retain clients, market share or profit margins.

Our industry is highly competitive and rapidly innovating, with low barriers to entry. We compete in global, national, regional and local markets with full-service and specialized temporary staffing companies as well as business process outsourcing companies that also offer our services. Our competitors offer a variety of flexible workforce solutions. Therefore, there is no assurance that we will be able to retain clients or market share in the future, nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or maintain our current profit margins.

~~We may be unable to attract sufficient qualified associates and candidates to meet the needs of our clients.~~

We compete to meet our clients’ needs for workforce solutions, therefore, we must continually attract qualified associates and candidates to fill positions. Attracting qualified associates and candidates depends on factors such as desirability of the assignment, location, the associated wages and other benefits. Prior to COVID-19, unemployment in the U.S. was low, making it challenging to find sufficient eligible associates and candidates to meet our clients’ orders. The economic slowdown resulting from COVID–19 increased unemployment substantially, but we cannot predict its continued effect on employment rates. Government responses to COVID-19 including generous unemployment benefits, stimulus payments, and other direct payments to individuals, have negatively impacted our ability to recruit qualified associates and candidates, and may continue to impact our recruiting efforts in the future. Continued similar benefits will further impact our ability to recruit in the future. We have experienced shortages of qualified associates and candidates and may experience such shortages in the future. Further, if there is a shortage, the cost to employ or recruit these individuals could increase and our ability to generate revenue would be harmed if we could not fill positions. If we are unable to pass those costs through to our clients, it could materially and adversely affect our business. Organized labor periodically engages in efforts to represent various groups of our associates. If we are subject to unreasonable collective bargaining agreements or work disruptions, our business could be adversely affected.RISKS RELATED TO CYBERSECURITY, DATA PRIVACY AND INFORMATION SECURITY

Cybersecurity vulnerabilities and incidents could lead to the improper disclosure of information about our clients, candidates, associates and employees.

Our business requires the use, processing, and storage of confidential information about ~~applicants,~~ candidates, associates, ~~other~~ employees and clients. We use information technology and other computer resources to carry out operational and support activities and maintain our business records. We rely on information technology systems to process, transmit, and store electronic information and to communicate among our locations around the world and with our clients, partners, associates, and employees. The breadth and complexity of this infrastructure increases the potential risk of security breaches which could lead to potential unauthorized disclosure of confidential information.

Our systems and networks are vulnerable to computer viruses, malware, hackers and other security issues, including physical and electronic break-ins, disruptions from unauthorized access and tampering, social engineering attacks, impersonation of authorized users and coordinated denial-of-services attacks. We have experienced cybersecurity incidents and attacks ~~which~~that have not had a material impact on our business or results of operations; however, there is no assurance that ~~such~~the impacts of any future incidents or attacks will not be ~~material in the future.~~material. The security controls over sensitive or confidential information and other practices we and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such information. Continued investments in cybersecurity will increase our costs and a failure to prevent access to our systems could lead to penalties, litigation, and damage to our reputation. Perceptions that we do not adequately protect the privacy of information could harm our relationship with clients and employees.

Data security, data privacy and data protection laws and other technology regulations increase our costs.

Laws and regulations related to privacy and data protection are evolving and generally becoming more stringent. We may fail to implement practices and procedures that comply with increasing international and domestic privacy regulations, such as the General Data Protection Regulations or the California Consumer Privacy Act. Several additional U.S. states have issued cybersecurity regulations that outline a variety of required security measures for protection of data. These regulations are designed to protect client, candidate, associate, and employee data and require that we meet stringent requirements regarding the handling of personal data, including the use, protection and transfer of personal data. As these laws continue to change, we may be required to make changes to our services, solutions or products to meet the new legal requirements. Changes in these laws may increase our costs to comply as well as our potential costs through higher potential penalties for non-compliance.

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Failure to protect the integrity and security of such confidential and/or proprietary information could expose us to regulatory fines, litigation, contractual liability, damage to our reputation and increased compliance costs.

Improper disclosure of, or access to, our clients’ information could materially harm our business.

Our associates and employees may have access to or exposure to confidential information about ~~applicants,~~ candidates, associates, ~~other~~ employees and clients. The security controls over sensitive or confidential information and other practices we, our clients, and our third-party vendors follow may not prevent the improper access to, disclosure of, or loss of such ~~information.~~information, including through failure of employees or associates to properly comply with such controls or practices. Failure to protect the integrity and security of such confidential and/or proprietary information could expose us to regulatory fines, litigation, contractual liability, damage to our reputation and increased compliance costs.

~~GENERAL RISK FACTORS~~

~~Demand for our workforce solutions is significantly affected by fluctuations in general economic conditions.~~

The demand for our workforce solutions is highly dependent upon the state of the economy and the workforce needs of our clients, which creates uncertainty and volatility. National and global economic activity is slowed by many factors, including rising interest rates, political and legislative changes, epidemics, other significant health concerns, and global trade uncertainties. As economic activity slows, companies tend to reduce their use of associates and recruitment of new employees. We work in a broad range of industries that primarily include construction, manufacturing and logistics, warehousing and distribution, waste and recycling, energy, retail, and hospitality. For example, we experienced significantly reduced demand from our clients due to COVID-19. Significant declines in demand from any region or industry in which we have a major presence, or the financial health of our clients, significantly decreases our revenues and profits. The travel and hospitality industry was more severely impacted by COVID-19 and may recover more slowly. Deterioration in economic conditions or the financial or credit markets could also have an adverse impact on our clients’ financial health or their ability to pay for services we have already provided.

It is difficult for us to forecast future demand for our services due to the inherent uncertainty in forecasting the direction and strength of economic cycles and the project nature of our staffing assignments. The uncertainty can be exacerbated by volatile economic conditions, which has caused and may continue to cause clients to reduce or defer projects for which they utilize our services. The negative impact to our business can occur before, during or after a decline in economic activity is seen in the broader economy. When it is difficult for us to accurately forecast future demand, we may not be able to determine the optimal level of personnel and investment necessary to profitably manage our business in light of opportunities and risks we face.

~~Outsourcing certain aspects of our business could result in disruption and increased costs.~~

We have outsourced certain aspects of our business to third-party vendors. These relationships subject us to significant risks including disruptions in our business and increased costs. For example, we license software from third parties, much of which is central to our systems and our business. The licenses are generally terminable if we breach our obligations under the license agreements. If any of these relationships were terminated, or if any of these parties were to cease doing business or supporting the applications we currently utilize, our business could be disrupted and we may be forced to spend significant time and money to replace the licensed software. In addition, we have engaged third parties to host and manage certain aspects of our data center, information and technology infrastructure, mobile apps, and electronic pay solutions, to provide certain back office support activities, and to support business process outsourcing for our clients. We are subject to the risks associated with the vendors’ inability to provide these services in a manner that meets our needs. If the cost of these services is more than expected, if the vendors suddenly cease providing their services, if we or the vendors fail to adequately protect our data and information is lost, or if our ability to deliver our services is interrupted, then our business and results of operations may be negatively impacted.

~~We may not achieve the intended effects of our business strategy which could negatively impact our results.~~

Our business strategy focuses on driving growth in our PeopleReady, PeopleManagement and PeopleScout business segments by investing in innovative technology and initiatives which drive organic growth. These investments may not achieve our desired results or may be impacted by matters outside of our control. If we are unsuccessful in executing any of these strategies, we may not achieve our goal of revenue and profitability growth, which could negatively impact financial results.

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Failure of our information technology systems could adversely affect our operating results.

The efficient operation of our business ~~and~~ applications and services we provide is dependent on reliable technology. We rely on our information technology systems to monitor and control our operations, adjust to changing market conditions, implement strategic initiatives and provide services to clients. We rely heavily on proprietary and third-party information technology systems, mobile device technology data centers, cloud-based environments and other technology. We take various precautions and have enhanced controls around these systems, but information technology systems are susceptible to damage, disruptions, shutdowns, power outages, hardware failures, computer viruses, malicious attacks, telecommunication failures, user errors, catastrophic events or failures during the process of upgrading or replacing software, vendors, or databases. The failure of technology and our applications and services, and our information systems to perform as anticipated could disrupt our business and result in decreased revenue and increased overhead costs, causing our business and results of operations to suffer materially.

Our facilities ~~operations~~ and ~~information technology systems~~operations are vulnerable to damage and interruption.

Our primary computer systems, headquarters, support facilities and operations are vulnerable to damage or interruption from power outages, ~~computer and telecommunications failures, computer viruses,~~ employee errors, security breaches, natural disasters, extreme weather conditions, civil unrest and catastrophic events. Failure of our systems, or damage to our facilities, may cause significant interruption to our business and require significant additional capital and management resources to resolve, causing material harm to our business.

GENERAL RISK FACTORS

Our results of operations could materially deteriorate if we fail to attract, develop and retain qualified employees.

Our performance is dependent on attracting and retaining qualified employees who are able to meet the needs of our clients. We believe our competitive advantage is providing unique solutions for each client, which requires us to have trained and engaged employees. Our success depends upon our ability to attract, develop and retain a sufficient number of qualified employees, including management, sales, recruiting, service, technology and administrative personnel. The turnover rate in the employment services industry is high, and qualified individuals may be difficult to attract and hire. Our inability to recruit, train, motivate, retain, and provide a safe working environment to a sufficient number of qualified individuals may delay or affect the speed and quality of our strategy execution and planned growth. Delayed expansion, significant increases in employee turnover rates, failure to keep our staff healthy or significant increases in labor costs could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions may have an adverse effect on our business.

We may continue making acquisitions aas part of our business strategy. This strategy may be impeded, however, and we may not achieve our long-term growth goals if we cannot identify suitable acquisition candidates or if acquisition candidates are not available under acceptable terms. We may have difficulty integrating acquired companies into our operating, financial planning, and financial reporting systems and may not effectively manage acquired companies to achieve expected growth.

Future acquisitions could result in incurring additional debt and contingent liabilities, an increase in interest expense, amortization expense, and charges related to integration costs. Additional indebtedness could also include covenants or other restrictions that would impede our ability to manage our operations. We may also issue equity securities to pay for an acquisition, which could result in dilution to our shareholders. Any acquisitions we announce could be viewed negatively by investors, which may adversely affect the price of our common stock. Acquisitions can also result in the addition of goodwill and intangible assets to our financial statements and we may be required to record a significant charge in our financial statements during the period in which we determine an impairment of our acquired goodwill and intangible assets has occurred, which would negatively impact our financial results. The potential loss of key executives, employees, clients, suppliers, vendors, and other business partners of businesses we acquire may adversely impact the value of the assets, operations, or business we acquire. These events could cause material harm to our business, operating results or financial condition.

~~Our results~~

Page - 34

Table of ~~operations could materially deteriorate if we fail to attract, develop and retain qualified employees.~~Contents

Our performance is dependent on attracting and retaining qualified employees who are able to meet the needs of our clients. We believe our competitive advantage is providing unique solutions for each client, which requires us to have trained and engaged employees. Our success depends upon our ability to attract, develop and retain a sufficient number of qualified employees, including management, sales, recruiting, service, technology and administrative personnel. The turnover rate in the employment services industry is high, and qualified individuals may be difficult to attract and hire. Our inability to recruit, train, motivate and provide a safe working environment to a sufficient number of qualified individuals may delay or affect the speed and quality of our strategy execution and planned growth. Delayed expansion, significant increases in employee turnover rates, failure to keep our staff healthy or significant increases in labor costs could have a material adverse effect on our business, financial condition and results of operations.

We face risks in operating internationally.

A portion of our business operations and support functions are located outside of the U.S. These international operations are subject to a number of risks, including the effects of COVID-19 and governmental action, such as travel restrictions and “stay-at-home” orders, political and economic conditions in those foreign countries, foreign currency fluctuations, the burden of complying with various foreign laws and technical standards, unpredictable changes in foreign regulations, U.S. legal requirements governing U.S. companies operating in foreign countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations. ~~We have operations in the United Kingdom, which could be negatively impacted as clients in the United Kingdom encounter uncertainties related to the~~

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~~United Kingdom’s exit from the European Union.~~ We could also be exposed to fines and penalties under U.S. or foreign laws, such as the Foreign Corrupt Practices Act, which prohibits improper payments to governmental officials and others for the purpose of obtaining or retaining business. Although we have implemented policies and procedures designed to ensure compliance with these laws, we cannot be sure that our employees, contractors or agents will not violate such policies. Any such violations could materially damage our reputation, brands, business and operating results. Further, changes in U.S. laws and policies governing foreign investment and use of foreign operations or workers, and any negative sentiments towards the U.S. resulting from such changes, could adversely affect our operations.

~~We may have additional tax liabilities that exceed our estimates.~~

We are subject to federal taxes, a multitude of state and local taxes in the U.S., and taxes in foreign jurisdictions. We face continued uncertainty surrounding ongoing job tax credits we utilize, and for the recent business tax incentives related to measures taken to soften the impact of COVID-19. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain. We are regularly subject to audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical tax provisions and accruals. The results of an audit or litigation with tax authorities could materially harm our business. Changes in interpretation of existing laws and regulations by a taxing authority could result in penalties and increased costs in the future. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing intercompany arrangements or may change their laws, which could increase our worldwide effective tax rate and harm our financial position and results of operations.

~~Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting.~~

If our management is unable to certify the effectiveness of our internal controls, including those over our third-party vendors, our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal controls over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause our stock price to decline.

The price of our common stock may fluctuate significantly, which may result in losses for investors.

The market price for our common stock has been and may be subject to significant volatility. Our stock price can fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include, but are not limited to, changes in general economic conditions, including those caused by COVID-19; social unrest; announcement of new services or acquisitions by us or our competitors; changes in financial estimates or other statements by securities analysts; changes in industry trends or conditions; regulatory developments; and any major change in our Board or management. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated to the operating performance of listed companies. These broad market and industry factors may impact the price of our common stock, regardless of our operating performance.


Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below includes repurchases of our common stock pursuant to publicly announced plans or programs and those not made pursuant to publicly announced plans or programs during the thirteen weeks ended June ~~27, 2021.~~26, 2022.

Period Total number
of shares
purchased (1) Weighted
average price
paid per
share (2) Total number of shares
purchased as part of
publicly announced plans
or programs Maximum number of shares (or
approximate dollar value) that
may yet be purchased under
plans or programs at period
end (3)
03/29/2021 through 04/25/2021 2,062 $22.56 — $66.7 million
04/26/2021 through 05/23/2021 1,776 $28.30 — $66.7 million
05/24/2021 through 06/27/2021 1,254 $27.53 — $66.7 million
Total 5,092 $25.79 —


Period	Total number of shares purchased (1)	Weighted average price paid per share (2)	Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value that may yet be purchased under plans or programs at period end (3)
03/28/2022 through 04/24/2022	449,833	$28.57	447,736	$100.9 million
04/25/2022 through 05/22/2022	460,778	$25.74	459,183	$89.1 million
05/23/2022 through 06/26/2022	978	$21.96	—	$89.1 million
Total	911,589	$27.13	906,919

(1)During the thirteen weeks ended June ~~27, 2021,~~26, 2022, we purchased ~~5,092~~4,670 shares in order to satisfy employee tax withholding obligations upon the vesting of restricted stock. These shares were not acquired pursuant to our publicly announced share repurchase program.

(2)Weighted average price paid per share does not include any adjustments for commissions.

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(3)On October 16, 2019, our Board of Directors authorized a $100.0 million share repurchase program of our outstanding common stock. On February 2, 2022, our Board of Directors authorized a $100.0 million addition to our share repurchase program of our outstanding common stock. The share repurchase program does not obligate us to acquire any particular amount of common stock and does not have an expiration ~~dates.~~date. As of June ~~27, 2021, $66.7~~26, 2022, $89.1 million remains available for repurchase under the existing authorization. ~~The second amendment to our credit agreement prohibited us from repurchasing shares until July 1, 2021.~~


Item 3.			DEFAULTS UPON SENIOR SECURITIES

Not applicable.


Item 4.			MINE SAFETY DISCLOSURES

Not applicable.


Item 5.			OTHER INFORMATION

None.

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Item 6.			INDEX TO EXHIBITS

Incorporated by reference

Exhibit number

Exhibit description

Filed herewith

Form

File no.

Date of first filing

3.1

Amended and Restated Articles of Incorporation.

8-K

001-14543

05/12/2016

3.2

Amended and Restated Bylaws.

10-Q

001-14543

10/30/2017

10.1

Executive Employment Agreement between TrueBlue, Inc and Steven C. Cooper, dated July 8, 2022

8-K

001-14543

07/14/2022

10.2

Executive Change in Control Agreement between TrueBlue, Inc and Steven C. Cooper dated July 8, 2022

8-K

001-14543

07/14/2022

10.4

Non-Competition Agreement between TrueBlue, Inc. and Steven C. Cooper, dated July 8, 2022

8-K

001-14543

07/14/2022

31.1

Certification of ~~A. Patrick Beharelle,~~Steven C. Cooper, Chief Executive Officer of TrueBlue, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Derrek L. Gafford, Chief Financial Officer of TrueBlue, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of ~~A. Patrick Beharelle,~~Steven C. Cooper, Chief Executive Officer of TrueBlue, Inc. and Derrek L. Gafford, Chief Financial Officer of TrueBlue, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial statements from the Company’s 10-Q, formatted as Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income, ~~(Loss),~~ (iii) Consolidated Statements of Cash Flows, and (iv) Notes to consolidated financial statements.

104

Cover page interactive data file - The cover page from this Quarterly Report on Form 10-Q is formatted as Inline XBRL

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TrueBlue, Inc.

/s/ ~~A. Patrick Beharelle~~Steven C. Cooper

7/~~26/2021~~25/2022

Signature

Date

By:

~~A. Patrick Beharelle, Director, President and~~Steven C. Cooper, Chairman of the Board, Chief Executive Officer and President

/s/ Derrek L. Gafford

7/~~26/2021~~25/2022

Signature

Date

By:

Derrek L. Gafford, Chief Financial Officer and
Executive Vice President

/s/ Richard B. Christensen

7/~~26/2021~~25/2022

Signature

Date

By:

Richard B. Christensen, Chief Accounting Officer, Treasurer and Senior Vice President

Page - 4037


	December 27, 2020
(in thousands)	Total fair value		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Cash and cash equivalents	$	62,507	$	62,507	$	0	$	0
Restricted cash and cash equivalents	56,105		56,105		0		0
Cash, cash equivalents and restricted cash (1)	$	118,612	$	118,612	$	0	$	0

Municipal debt securities	$	70,723	$	0	$	70,723	$	0
Corporate debt securities	85,937		0		85,937		0
Agency mortgage-backed securities	512		0		512		0
U.S. government and agency securities	1,124		0		1,124		0
Restricted investments classified as held-to-maturity (2)	$	158,296	$	0	$	158,296	$	0

Deferred compensation investments (3)	$	5,915	$	5,915	$	0	$	0


(in thousands)	Jun 27, 2021		Dec 27, 2020
Cash collateral held by workers’ compensation insurance carriers	$	22,609	$	22,253
Cash and cash equivalents held in Trust	26,344		29,410
Investments held in Trust	135,894		152,247
Letters of credit	6,095		6,095
Surety bonds (1)	20,831		20,616
Total collateral commitments	$	211,773	$	230,621