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Text: I'm joined by our Chief Executive Officer, Patrick Beharelle.
We use non-GAAP measures when presenting our financial results.
Any comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated.
Before I dive into quarterly results, I wanted to take a moment to reflect back on 2020.
In March of 2020, jurisdictions across the country began implementing restrictions to protect public health, as the impact of COVID set in.
Many of our clients temporarily halted operations or reduced volumes and our revenue dropped precipitously.
By April, our year-over-year revenue decline had a level of 42%.
Management was prepared for this moment, and we reacted quickly.
We deployed pre-existing recession plans and modified operational protocols to focus on the health and safety of our employees, workers and clients.
In April, we unveiled a plan to reduce 2020 SG&A by approximately $100 million compared to 2019, which we have exceeded.
These cost reductions helped us right-size the business to match lower client demand and preserve capital.
The actions were difficult, but they were taken with care, and with the long-term in mind.
For the employees that lost their jobs, we provided three months of fully paid extended healthcare benefits so they wouldn't have to scramble for new coverage in the midst of the pandemic.
To ensure we're well-positioned as business conditions improve, we are investing heavily in client and candidate-facing technologies and kept our branch footprint fully intact.
Finally, to reward our employees for sticking with us this year, we are paying a one-time bonus.
The impact of our efforts is evident in our results.
Our revenue trends have been improving each quarter since Q2 2020, and we posted positive net income in the third and fourth quarters.
For the full year, revenue was down 22%.
To mitigate this decrease, we reduced selling, general and administrative expense by 21%.
While we encountered a net loss for the year largely due to a goodwill and intangible asset impairment charge in the first quarter and workforce reduction charges in the second quarter, we were profitable on an adjusted net income basis for the year.
Of equal importance, employee morale and engagement is high.
Our most recent employee engagement scores from September were higher than they were prior to the pandemic.
Now let's discuss our fourth quarter results.
We took the right actions to restore profitability and position the company for long-term growth as the economy continues to recover.
In addition to improving revenue trends with the fourth quarter down 12% versus 25% in the third quarter, we sustained our cost discipline to drive year-over-year growth of 25% in income from operations.
Now, let's turn to our results by segment, starting with PeopleReady.
PeopleReady is our largest segment, representing 60% of trailing-12-month revenue and 73% of segment profit.
PeopleReady is the leading provider of on-demand labor and skilled trades in the North American industrial staffing market.
We service our clients via a national footprint of physical branch locations as well as our JobStack mobile app.
PeopleReady's revenue was down 18% during the quarter versus down 29% in Q3, and we saw intra-quarter improvement with revenue down 15% in December versus down 20% in October.
PeopleManagement is our second largest segment representing 32% of trailing-12-month revenue and 20% of segment profit.
PeopleManagement provides onsite industrial staffing and commercial driving services in the North American industrial staffing market.
The essence of a typical PeopleManagement engagement is supplying an outsourced workforce that involves multi-year, multi-million-dollar onsite or driver relationships.
These types of client engagements were more resilient in the downturn, when compared to the supplemental nature of a typical PeopleReady client engagement.
PeopleManagement returned to growth in the fourth quarter with revenue up 5%, and intra-quarter improvement with December up 9% versus up 1% in October.
Turning to our third segment, PeopleScout, represents 9% of trailing-12-month revenue and 8% of segment profit.
PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing and managed service provider offerings.
Revenue was down 24% during the quarter versus down 48% in Q3.
PeopleScout results were particularly impacted by exposure to large travel and leisure clients.
Now I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady.
Our long-term strategy at PeopleReady is to further digitalize our business model to gain market share and improve the efficiency of our cost structure.
Most of our competitors in this segment are smaller mom and pops that don't have the scale or capital to deploy something like our JobStack mobile app.
So this, along with our nationwide footprint is what makes us unique.
We began rolling out JobStack in 2017 to our associates, and in 2018, we launched the client side of the app.
We now have digital fill rates north of 50% and more than 26,000 clients using the app.
In Q4 2020, we filled 811,000 shifts via JobStack, representing a digital fill rate of 57%.
Our client user count ended the quarter at 26,300, up 23% versus Q4 2019.
In mid-2020 we introduced new digital onboarding features that cut application time in half.
This has led to some great operational results as we increase the ratio of associates put to work versus all applicants.
We continue to experience an increase in worker throughput of approximately 20%.
We expect this percentage to further improve as we fine tune the process.
This is exciting, and as we move back toward a more supply constrained environment, increased throughput will translate directly to revenue.
Right now, we are very focused on driving heavy client user growth.
A heavy user is a client who has 50 or more touches on JobStack per month, whether it's entering an order, rating a worker or approving time.
JobStack heavy users have consistently posted better year-over-year growth rates compared to the rest of PeopleReady.
The growth differential between heavy users and non-users reached its peak in December with an over 30 percentage points year-over-year growth differential on a same customer basis.
This growth differential is largely driven by wallet share takeaways from competitors.
Heavy user clients are telling us a major reason they are moving share to PeopleReady is due to JobStack's unique capabilities.
Our focus on heavy user growth is beginning to become more material in our overall results.
For all heavy users, we doubled the mix since 2019, up from 11% of PeopleReady's business in fiscal 2019 to 24% for 2020.
Of course, our positive strategic progress is overshadowed by the macro environment at the moment, but we continue to invest in our digital strategy and believe this approach will help PeopleReady emerge stronger than prior to the pandemic.
As our digital strategy continues to mature, we're taking a look at areas within PeopleReady where we can reduce our service delivery costs.
In 2020, we began testing a few different strategies to further reduce the cost of delivering our services.
We plan to expand our testing in 2021 to include more technology utilization and an altered go-to-market approach.
As we move down this path, I want to emphasize that the value and importance of our branch network should not be underestimated.
We need to maintain a local presence in our communities where we do business.
At the same time, we do see an opportunity to centralize more services and reorient job roles to improve our client-focused delivery.
We'll continue to update you on this front as plans progress.
Turning to PeopleManagement, our strategy is to focus on execution and grow our client base.
Initiatives we've already implemented include sharpening our vertical market focus to target essential manufacturers and leverage our strength in e-commerce.
These are verticals that have held up well relative to the decline in non-essential goods at traditional brick and mortar retailers.
We've also made a concentrated effort to enhance the productivity of our sales teams.
First, we completed the integration of our Staff Management and SIMOS brand sales teams, allowing the integrated team to offer a full portfolio of hourly and cost per-unit solutions to clients.
Second, we are expanding our presence in smaller markets we believe have been underserved.
These strategic initiatives are already paying off.
Even in the middle of this downturn, year-to-date new business wins at PeopleManagement are up 20% versus the prior year, as we've secured $79 million of annualized new business wins versus $66 million in the prior year.
As the demand environment recovers, we'll be increasing sales resources and investing in client care programs to maintain our momentum.
Turning to PeopleScout, the strategy leverages our strong brand reputation to capture opportunities in an industry poised for growth.
Before COVID struck, we, along with our competitors experienced a trend toward more in-sourcing, with some clients bringing more recruitment functions in-house.
Many of the in-house teams have been reduced or eliminated during the pandemic and we expect a trend reversal back toward outsourcing as the economy recovers.
Focusing our sales teams on this trend will allow us to increase wallet share at our existing clients and diversify the industry mix within our portfolio.
I'd like to take a moment to touch on our capital allocation priorities.
During the first half of 2020, we repurchased $52 million of our common stock, or 9% of our common stock outstanding, at favorable prices.
While 2020 was not an easy year, we took the right actions to preserve the longevity of the business while retaining our operational strengths.
Investments in our digital strategy and our lean cost structure have us well-positioned for 2021.
I am extremely proud of the leadership and resolve demonstrated by the entire TrueBlue team.
By coming together and staying true to our mission of connecting people and work, we have continued to provide a vital service to our communities even in the midst of a pandemic.
I'll now pass the call over to Derrek who will share greater detail around our financial results.
Total revenue for Q4 2020 was $519 million, representing a decline of 12%.
We posted net income of $8 million, or $0.23 per share, and adjusted net income of $11 million, or $0.33 per share.
While net income this quarter declined 8% compared to Q4 2019 in large part due to a higher effective income tax rate, income from operations was up 25%.
This increase in operating profitability was due to further improvement in our revenue trends and disciplined cost management.
The Q4 year-over-year revenue decline was 13 percentage points better than the Q3 year-over-year revenue decline and Q4 SG&A was down 22% year-over-year, or down nearly twice as much as the revenue decline for the quarter.
Adjusted EBITDA was $22 million, an increase of 4% compared to Q4 2019 and adjusted EBITDA margin was up 60 basis points.
Gross margin of 23.3% was down 190 basis points.
Our staffing businesses contributed 170 basis points of compression from pay rates increasing faster than bill rates and from sales mix largely due to the revenue growth in our PeopleManagement business, which has a lower gross margin than our PeopleReady business, which had a revenue decline.
PeopleScout contributed another 20 basis points of compression primarily due to client mix and lower volume.
We expect additional gross margin pressure in the first quarter of 2021, but expect it to moderate as we anniversary the onset of the pandemic in Q2.
Assuming a strong bounce back in economic growth in the back half of 2021, we expect some gross margin expansion assuming we experience revenue growth in our PeopleScout business due to the operating leverage associated with its cost of sales, and to a lesser extent, gross margin expansion in our staffing businesses from favorable bill and pay rates spreads associated with less slack in the labor supply.
Turning to SG&A expense, we delivered another quarter of strong results with expense down $28 million, or 22%.
We maintained our cost discipline while preserving our operational strengths to ensure the business is well-positioned for growth as economic conditions improve.
We also see opportunity to further reduce the costs of our PeopleReady branch network, while maintaining the strength of our geographic footprint through a greater use of technology, centralizing work activities and repurposing job roles.
We are in the early stages of planning the pilots that will occur throughout 2021, and if successful, will lead to additional efficiencies in 2022.
As Patrick mentioned, we are rewarding our employees with a one-time COVID bonus for their extraordinary efforts this past year.
This bonus, as well as COVID government subsidies, are excluded from adjusted net income and adjusted EBITDA.
Our effective income tax rate was 28% in Q4, which included additional expense associated with less net operating loss benefit available to carry back to prior years, due to a stronger performance in Q4.
Excluding the net operating loss adjustment, the effective income rate was 9%.
Turning to our segments, PeopleReady, our largest segment, saw an 18% decline in revenue and segment profit was down 10%.
As additional social and government mandates were enacted in December to address the COVID-19 threat, our year-over-year decline did not improve much, but held relatively steady and this trend has continued into January where revenue was down 18%.
PeopleManagement saw 5% growth in revenue and segment profit was up 104%.
PeopleManagement experienced encouraging intra-quarter revenue improvement, with December up 9%, compared to 1% in October.
Revenue growth continued into January with PeopleManagement up 5%.
About half of the segment profit growth in Q4 is attributable to cost management and revenue growth and half from unique costs in Q4 last year creating a favorable comparison this year.
Turning to PeopleScout, we saw a 24% decline in revenue and segment profit was down 18%.
Temporary project work provided 6 percentage points of revenue benefit.
As Patrick noted, PeopleScout results were adversely impacted by exposure to travel and leisure clients, which made up roughly 28% of the prior year mix, and revenue for this vertical was down 54%.
Now let's turn to the balance sheet and cash flows.
Our balance sheet is in excellent shape.
We finished the year with $63 million in cash, no outstanding debt, and an unused credit facility.
Cash flow from operations in 2020 was $153 million, up from $94 million in the prior year, with the increase coming largely from the deleveraging of accounts receivable.
It was also a strong quarter for us from a working capital perspective with Days Sales Outstanding at 49 days or down 3.5 days in comparison with Q4 last year.
For the first quarter of 2021, we expect gross margin contraction of 290 basis points to 250 basis points and for the full year contraction of 50 basis points to 10 basis points.
As a reminder, in Q1 2020, there was 130 basis points of gross margin expansion from healthcare benefits that were excluded from adjusted net income and adjusted EBITDA.
For the full year 2020, there was 20 basis points of net benefit from the healthcare benefit I mentioned, less workforce reduction costs that were excluded from adjusted net income and adjusted EBITDA.
You can find more information on these items in our non-GAAP reconciliations.
For the first quarter of 2021, we expect a year-over-year SG&A reduction of $13 million to $17 million.
I'd also like to remind everyone that we will anniversary most of our cost reduction actions in April of 2021.
For capital expenditures, we expect about $16 million for the first quarter and $37 million to $41 million for full year 2021.
These figures include approximately $8 million and $10 million for Q1 and 2021, respectively, in build-out costs for our Chicago support center, of which $7 million will be reimbursed by our landlord with $6 million of the reimbursements expected in the first quarter.
The reimbursements from our landlord will be reflected in operating cash flows.
Our outlook for fully diluted weighted average shares outstanding for the first quarter of 2021 is 35.3 million.
Providing an annual outlook for an effective income tax rate is difficult due to the semi-fixed nature of the work opportunity tax credit.
We expect our effective income tax rate for the full year 2021, before job tax credits, to be about 23% to 27%, and we expect total job tax credits to be $8 million to $10 million.
Due to the size of expected job tax credits, it is possible to have pre-tax income and an effective income rate benefit instead of expense at lower levels of profitability.
While we have more work to do to get back to where we were before COVID hit, we like the progress we have made.
We have seen steady improvements in our revenue trends, and with the prospect of meaningful vaccinations on the horizon, we are optimistic about the potential upside in many of the hard hit end markets we serve.
We took the right actions to improve profitability, and have done so without losing our operational strengths or technology momentum.
And, we ended 2020 with a balance sheet that is stronger than where we started the year, which will further enable our ability to take advantage of the growth opportunities ahead of us.

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q4 adjusted earnings per share $0.33.
q4 earnings per share $0.23.
q4 revenue $519 million versus refinitiv ibes estimate of $498.1 million.

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