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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 discuss our fourth quarter results, I want to take a moment to reflect on the past year.
2021 was an extraordinary year across many levels.
As the world continued to learn how to live in a pandemic, I am very proud of the TrueBlue community for growing together to deliver solid results.
The demand for our services has never been higher as businesses turn to flexible solutions to solve their workforce challenges.
Despite the ongoing challenges associated with COVID, including lower worker supply and supply chain disruptions, our ongoing commitment toour digital investments and numerous operating adjustments positioned us to emerge stronger from this downturn.
Revenue grew 18% for the year and is on pace to recover to pre-pandemic levels two years faster than the previous recession.
New client wins at PeopleManagement and PeopleScout throughout the year and existing client recovery at PeopleReady and PeopleScout in the second half drove this growth.
Compared to where we were prior to the pandemic, we now find ourselves with a stronger, more agile and more efficient business model.
2022 will be my fourth year as CEO of TrueBlue, and I've never been more optimistic about the momentum we have in the business.
Now let's turn to our fourth quarter results.
I am pleased to announce our fourth quarter results surpassed pre-pandemic levels.
Revenue was $622 million, an increase of 20%, compared to Q4 2020 and up 5% versus Q4 2019.
PeopleReady's revenue growth accelerated throughout the quarter, driven by improved worker supply and strong performance within the retail sector, while same customer demand and new customer wins continued to produce impressive PeopleScout results.
These factors produced adjusted EBITDA of $36 million, an increase of $14 million compared to Q4 2020 and an increase of $15 million compared to Q4 2019.
Let's take a closer look at the performance of each of our three segments, starting with PeopleReady.
PeopleReady is our largest segment, representing 59% of total trailing 12-month revenue and 63% of total 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.
Year-over-year PeopleReady revenue was up 22% during the quarter.
Compared to the fourth quarter of 2019, we recovered 99% of our revenue, which is an improvement of 15 points from the recovery rate in the third quarter of this year.
Performance was boosted by improving worker supply trends and solid results within the retail vertical.
For worker supply, we saw an increase in the number of applicants, resulting in a 13-point improvement from September to December in associates put to work compared to 2019.
Retail results were strong during the quarter, increasing 100% year-over-year led by a seasonal surge, combined with ongoing project work.
PeopleManagement is our second largest segment, representing 29% of total trailing 12-month revenue and 10% of total segment profit.
PeopleManagement provides 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 multiyear, multimillion dollar onsite and driver relationships.
Even though PeopleManagement revenue exceeded the comparable 2019 period by 4%, revenue declined 1% in the fourth quarter.
This decrease is primarily due to lower same-site sales, which are being negatively impacted by recent supply chain disruptions impacting several of our clients.
Turning to our third segment, PeopleScout represents 12% of total trailing 12-month revenue and 27% of total segment profit.
PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing services, as well as offering managed service provider solutions.
Revenue momentum at PeopleScout continued during the fourth quarter, growing 96% year over year and surpassing the comparable 2019 period by 49%.
PeopleScout's strong results were driven by growth in existing client volumes of 71% year over year due to surging client demand and new customer wins.
Now I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady.
At PeopleReady, our most important strategy is to further digitalize our business model to gain market share and improve the efficiency of our service delivery cost structure.
temporary day labor market is highly fragmented, and there are very few large players in the industrial staffing segment where PeopleReady competes, with the bulk of the market made up of smaller companies.
These smaller, regional companies are typically not able to spend the type of investment required to deploy something like our JobStack mobile app.
So this, along with our nationwide footprint, is what makes us a leading provider within industrial staffing.
Our goal is to use JobStack to deliver value through differentiated associate and client experiences, leading to increased market share and operational efficiencies.
Since rolling out the application to associates in 2017 and to our clients in 2018, associate adoption has grown to over 90%, and our JobStack client user count ended the quarter at 29,700, up 13% versus Q4 2020.
We continue to focus on converting clients to heavy users.
As a reminder, a heavy user has 50 or more touches on JobStack per month, whether it's entering an order, rating a worker, or approving time.
Overall, heavy client users account for 56% of PeopleReady US on-demand revenue compared to 35% in Q4 2020.
We've also seen continued growth in our digital fill rates, which have increased 3x since rollout to nearly 60%, with 964,000 shifts filled via the app during the quarter.
With our digital strategy providing a differentiated experience, our centralized service centers to better serve existing clients and reach new ones more effectively is a major focus.
As a reminder, the service centers increase our accessibility as they operate 85 hours per week versus 60 hours for a typical branch.
This enhanced go-to-market approach includes repurposed job roles with the creation of dedicated, territory-based account managers who are responsible for new client acquisition and management of existing client relationships.
We expect the new structure will deliver a greater sales focus and provide elevated customer service, while nonclient facing positions will be reduced, resulting in a net cost reduction.
Based on progress made over the past nine months, I am excited to announce we have expanded our two service center pilots by consolidating additional branches into each.
In addition, we are testing a virtual service center model and opening a service center to support our skilled trade customers and tradespeople.
We view these actions as the next step in the journey.
We will expand existing locations and add new ones over time as long as we are able to meet the needs of our clients and achieve a variety of operational performance metrics.
We have developed a standard rollout framework to ensure service continuity for our clients and associates.
This includes aligning account managers to specific territories and client portfolios in advance of go-live, adjusting service center staffing levels to ensure adequate coverage, and a robust training and quality assurance process to ensure operational and service delivery excellence.
Once the service center rollout is complete, we expect annual run-rate cost savings of $10 million to $15 million.
Turning to PeopleManagement, our strategy is to focus on execution and grow our client base.
Last year, we sharpened our vertical focus to target essential manufacturers as well as warehouse and distribution centers and made investments in our sales teams to enhance business development activities.
With these initiatives implemented, we have broadened the strategy to expand our geographic footprint by targeting more local and underserved markets.
PeopleManagement secured annualized new business wins of $95 million this year, up more than 40% versus the three prior year comparable average, helping to offset recent supply chain challenges.
Additionally, we are investing in customer and associate care programs in an effort to better serve our clients' needs and improve retention.
Turning to PeopleScout, our strategy leverages our strong brand reputation to capture opportunities in an industry poised for growth.
Many companies reduced or eliminated their in-house recruiting teams during the pandemic, and now we are seeing companies return to hybrid and fully outsourced models.
Our ability to hire large volumes of workers quickly has us well-positioned.
And to capitalize further, we made investments in our sales teams to expand wallet share at existing clients and obtain new clients.
Our efforts are delivering results with annualized new wins of $39 million this year versus the three-year prior comparable average of $11 million.
Finally, I want to quickly address vaccine mandates.
On January 13, the Supreme Court blocked the Biden administration's vaccine mandate for large employers.
Leading up to the ruling, we were taking the appropriate steps to comply with the mandate.
As such, in the event vaccine mandates are enacted at the federal, state, or local levels, we will be prepared to service our clients.
Looking forward, connecting people and work remains at the center of the TrueBlue strategy.
As the economy improves and people return to work, we are excited about the prospects of the industry and our business.
I'll now pass the call over to Derrek who will share greater detail around our financial results.
Total revenue for Q4 2021 was $622 million, representing growth of 20% compared to Q4 2020 and growth of 5% compared to Q4 2019.
This growth was driven by strong results at PeopleReady and PeopleScout.
Strong overall demand, particularly in the retail sector, along with improvements in worker supply drove the PeopleReady results.
While PeopleScout benefited from strong client demand, as well as turnover in the employee base of its clients.
We posted net income of $20 million or $0.57 per share, an increase of $12 million compared to Q4 2020 and an increase of $11 million compared to Q4 2019.
Revenue growth and gross margin expansion contributed to the net income growth in 2021.
We delivered adjusted EBITDA of $36 million, an increase of $14 million compared to Q4 2020 and an increase of $15 million compared to Q4 2019.
Adjusted EBITDA margin was up 160 basis points compared to Q4 2020 and up 230 basis points compared to Q4 2019, with growth in 2021, again, driven by revenue growth and gross margin expansion.
Gross margin for Q4 2021 of 26.8% was up 350 basis points.
Our staffing segments contributed 310 basis points of margin expansion, comprised of 110 basis points from lower workers' compensation costs mainly due to favorable development of prior-period reserves; 70 basis points from favorable bill/pay spreads; 70 basis points from increasing PeopleReady sales mix, which carries a higher margin than PeopleManagement; and 60 basis points from PeopleReady customer mix.
Higher PeopleScout sales mix contributed the remaining 40 basis points of expansion.
SG&A expense increased 33%, which was higher than our revenue growth of 20% due to the magnitude of the cost actions taken in Q4 last year.
As a reminder, in Q4 2020, our cost management actions produced a decline in SG&A of 22%, which outpaced the revenue decline of 12% for the quarter.
As we anniversary these cost reductions, we expect SG&A growth to moderate.
SG&A as percentage of revenue in Q4 2021 improved by 30 basis points in comparison with Q4 2019.
Our effective income tax rate was 21% in Q4, which was slightly higher than expected due to lower tax credits.
Turning to our segments, PeopleReady revenue increased 22%, while segment profit increased 69%, and segment margin was up 210 basis points.
PeopleReady revenue growth accelerated throughout the quarter, driven by improved worker supply and high demand in the retail sector.
Revenue in the retail sector increased 100% year over year, largely due to a seasonal surge from one client, which contributed about half of the retail sector growth, or 4 percentage points of growth for the PeopleReady business, which we do not expect will carry into the first quarter.
The rest of the retail growth came from a combination of retail and distribution-related support, as well as store remodels.
Revenue growth trends were also favorable across most industry sectors and geographies.
Segment profit margin benefited from lower workers' compensation costs and positive bill/pay spreads.
PeopleManagement revenue decreased 1%, while segment profit decreased 20%, with 60 basis points of margin contraction.
Same-site sales are being negatively impacted by supply chain disruptions, which created a drag of approximately 4 percentage points during the quarter.
This headwind is being offset by solid performance from commercial driving services and new business wins.
The decline in segment profit margin is a function of the decrease in same-site sales, which carries a higher margin than new business wins due to the associated implementation costs, as well as higher employee-related costs reinstated during 2021 that were temporarily cut during 2020.
PeopleScout revenue increased 96%, with segment profit up $7 million and over 300 basis points of margin expansion.
During the quarter, same customer demand surged 71% year over year.
Of the increase, approximately 15 percentage points was related to clients catching up to pre-pandemic hiring levels.
Operating leverage from higher sales volume contributed to the improvement in year-over-year segment profit margin.
Now let's turn to the balance sheet and cash flows.
Our balance sheet is in great shape.
We finished the quarter with $50 million in cash and no outstanding debt.
While we experienced an improvement in net income this year, cash flow from operations is down, primarily due to the repayment of 2020 employer payroll taxes that were allowed to be deferred as part of the CARES Act and higher accounts receivable associated with our revenue growth.
Days sales outstanding increased three days compared to last year, which was a multiyear low but was one day lower than Q4 of 2019.
During the quarter, we repurchased $17 million of common stock and $13 million was purchased during the first quarter of this year.
The board of directors also authorized an additional $100 million in share repurchases, which we intend to complete over the next three years.
We are in the early stages of redesigning our PeopleReady technology platform to better support our digital strategy and new service center model.
This investment will replace a 20-year old internally built system and improve our ability to interact with clients and associates, which will also help us run our business with fewer branches.
In the first quarter, we expect approximately $3 million in operating costs as we prepare to implement this system at the end of this year and roughly $10 million for the full year.
Once the system implementation is complete, we do not expect these costs to continue.
And as such, we are excluding them from our adjusted EBITDA and adjusted net income results.
In connection with this transition, we are accelerating the depreciation of the existing systems that will be replaced by the new technology platform.
We expect $2 million in accelerated depreciation for full year 2022.
The accelerated depreciation will be excluded from our adjusted net income results.
As we head into 2022, we are optimistic about the business.
Our services are in high demand, and with the supply of workers improving, we are better able to meet customer demand.
And our technology strategies are creating competitive differentiation and additional operating efficiencies to further enable sustainable growth.

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q4 earnings per share $0.57.
q4 revenue rose 20 percent to $622 million.

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