TrueBlue Inc.
02/18/2026 | Press release | Distributed by Public on 02/18/2026 15:50
Annual Report for Fiscal Year Ending December 28, 2025 (Form 10-K)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide the reader of our accompanying consolidated financial statements ("financial statements") with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to our financial statements.
BUSINESS OVERVIEW
TrueBlue, Inc. (the "company," "TrueBlue," "we," "us" and "our") is a leading provider of specialized workforce solutions that connect employers and talent. Client demand for contingent workforce solutions and outsourced recruiting services is cyclical and dependent on the overall strength of the economy and labor market, as well as trends in workforce flexibility. During periods of rising economic uncertainty, clients reduce their contingent labor in response to lower volumes and reduced appetite for expanding production or inventory, which reduces the demand for our services. That environment also reduces demand for permanent placement recruiting, whether outsourced or in-house. However, as the economy emerges from periods of uncertainty, contingent labor providers are uniquely positioned to respond quickly to increasing demand for labor and rapidly fill new or temporary positions, replace absent employees, and convert fixed labor costs to variable costs. Similarly, companies turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover. Our business strategy is focused on accelerating growth to capture market share, while enhancing our long-term profitability. Key elements of this strategy include enhancing our sales function, expanding in high-growth, less cyclical and under-penetrated end markets as well as high-value roles, and accelerating innovation with technology and operational excellence. For additional discussion on our business and strategy, refer to Business, found in Part I, Item 1 of this Annual Report on Form 10-K.
Fiscal 2025 highlights
Total company revenue grew 3.1% to $1.6 billion for the fiscal year ended December 28, 2025, compared to the prior year. Growth was primarily due to the acquisition of Healthcare Staffing Professionals, Inc. in early 2025, as well as strong demand within our skilled businesses, while conditions continue to stabilize within on-demand, on-site and permanent hiring.
Total company gross profit as a percentage of revenue for the fiscal year ended December 28, 2025 contracted 310 basis points to 22.8%, compared to the prior year. The decline was primarily due to changes in revenue mix toward our lower margin staffing businesses, as well as less favorability in prior year workers' compensation reserve adjustments.
Total company selling, general and administrative ("SG&A") expense decreased 9.7% to $371.1 million for the fiscal year ended December 28, 2025, compared to the prior year. SG&A expense decreased as a result of continued operational cost management actions in response to the decline in demand for our services, and the simplification of our organizational structure in line with our strategic plan.
We recorded a goodwill and intangible asset impairment charge of $0.2 million during the fiscal year ended December 28, 2025, related to a trademark within our PeopleManagement segment. For the same period in the prior year, we recorded goodwill and intangible asset impairment charges of $59.7 million, primarily related to our PeopleReady reporting unit.
We recorded a right-of-use and other long-lived asset impairment charge of $18.4 million during the fiscal year ended December 28, 2025, related to the execution of a sublease for our Chicago support center as part of our continued efforts to shift to a remote or hybrid work model for our headquarters and United States ("U.S.") based support teams.
Income tax expense was $2.3 million for the fiscal year ended December 28, 2025, compared to $37.2 million for the same period in the prior year. We continue to maintain a valuation allowance against our U.S. federal, state and certain foreign deferred tax assets initially established in the fiscal second quarter of 2024, resulting in no current period income tax benefit for these jurisdictions.
The items described above contributed to our net loss of $48.0 million for the fiscal year ended December 28, 2025, compared to net loss of $125.7 million in the prior year.
As of December 28, 2025, we had cash and cash equivalents of $24.5 million and outstanding debt of $65.8 million. As of December 28, 2025, $67.6 million was available under the most restrictive covenant of our revolving credit agreement ("Revolving Credit Facility"), for total liquidity of $92.1 million.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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RESULTS OF OPERATIONS
Total company results
The following table presents selected financial data:
| (in thousands, except percentages and per share data) | 2025 | % of revenue | 2024 | % of revenue | ||||||||||
| Revenue from services | $ | 1,615,997 | $ | 1,567,393 | ||||||||||
| Gross profit | 367,842 | 22.8 | % | 406,393 | 25.9 | % | ||||||||
| Selling, general and administrative expense | 371,087 | 23.0 | 410,870 | 26.2 | ||||||||||
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Depreciation and amortization (exclusive of depreciation included in cost of services)
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24,823 | 1.5 | 28,624 | 1.8 | ||||||||||
| Goodwill and intangible asset impairment charge | 200 | - | 59,674 | 3.8 | ||||||||||
| Right-of-use and other long-lived asset impairment charge | 18,366 | 1.2 | - | - | ||||||||||
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Loss from operations
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(46,634) | (2.9) | % | (92,775) | (5.9) | % | ||||||||
| Interest and other income (expense), net | 1,003 | 4,251 | ||||||||||||
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Loss before tax expense
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(45,631) | (88,524) | ||||||||||||
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Income tax expense
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2,329 | 37,224 | ||||||||||||
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Net loss
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$ | (47,960) | (3.0) | % | $ | (125,748) | (8.0) | % | ||||||
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Net loss per diluted share
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$ | (1.61) | $ | (4.17) | ||||||||||
Revenue from services
| (in thousands, except percentages) | 2025 |
Growth % |
Segment % of total | 2024 | Segment % of total | ||||||||||||
| Revenue from services: | |||||||||||||||||
| PeopleReady | $ | 883,887 | 1.8 | % | 54.7 | % | $ | 868,549 | 55.4 | % | |||||||
| PeopleManagement | 544,448 | 0.4 | % | 33.7 | 542,201 | 34.6 | |||||||||||
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PeopleSolutions
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187,662 | 19.8 | % | 11.6 | 156,643 | 10.0 | |||||||||||
| Total company | $ | 1,615,997 | 3.1 | % | 100.0 | % | $ | 1,567,393 | 100.0 | % | |||||||
Total company revenue grew 3.1% to $1.6 billion for the fiscal year ended December 28, 2025, compared to the prior year. The primary driver of the growth was the acquisition of Healthcare Staffing Professionals, Inc. in early 2025, which contributed 3.5%, as well as growth within our skilled businesses, specifically in the energy and commercial driving industries. This growth was partially offset by declines within on-demand, on-site and permanent hiring, as business conditions continue to stabilize within these offerings.
PeopleReady
PeopleReady revenue grew 1.8% to $883.9 million for the fiscal year ended December 28, 2025, compared to the prior year, primarily as a result of growth within our skilled businesses, specifically in the energy industry. Growth from our skilled businesses was partially offset by declines within our on-demand business, as broader market conditions continue to stabilize.
PeopleManagement
PeopleManagement revenue grew 0.4% to $544.4 million for the fiscal year ended December 28, 2025, compared to the prior year. Revenue grew as a result of strong demand within our commercial driving business, partially offset by volume declines within our OnSite business. OnSite new business wins during fiscal 2025 significantly outperformed fiscal 2024, most of which were won in the second half of fiscal 2025, positioning this business for future growth.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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PeopleSolutions
PeopleSolutions revenue grew 19.8% to $187.7 million for the fiscal year ended December 28, 2025, compared to the prior year. The acquisition of Healthcare Staffing Professionals, Inc. in early 2025 contributed 35.4% of growth for fiscal 2025. Revenue for our PeopleScout business declined as labor market conditions have led to uncertainty around our clients' future workforce needs, and clients continue to experience less employee turnover while also facing cost pressures. This has resulted in our clients reducing hiring volumes, sourcing candidates with internal resources, and initiating hiring freezes to control costs. Despite these challenges, we have expanded existing and new client relationships into higher skilled roles, and in attractive end markets such as healthcare, engineering and technology. As our clients' hiring volumes return, the scale of these engagements position us well for future growth in this business.
Gross profit
| (in thousands, except percentages) | 2025 | 2024 | ||||||
| Gross profit | $ | 367,842 | $ | 406,393 | ||||
| Percentage of revenue | 22.8 | % | 25.9 | % | ||||
Gross profit as a percentage of revenue contracted 310 basis points to 22.8% for the fiscal year ended December 28, 2025, compared to 25.9% for the prior year. Changes in revenue mix resulted in a contraction of 200 basis points, primarily driven by revenue growth in renewable energy clients within our PeopleReady segment, as well as softness in RPO revenue and the acquisition of Healthcare Staffing Professionals, Inc. within our PeopleSolutions segment. Higher workers' compensation costs, driven by less favorable workers' compensation reserve adjustments, resulted in an additional 90 basis points of contraction. In addition, depreciation of certain software within PeopleSolutions, reported in cost of services, contributed 20 basis points of contraction.
Selling, general and administrative expense
| (in thousands, except percentages) | 2025 | 2024 | ||||||
| Selling, general and administrative expense | $ | 371,087 | $ | 410,870 | ||||
| Percentage of revenue | 23.0 | % | 26.2 | % | ||||
Total company SG&A expense improved by $39.8 million or 9.7% for the fiscal year ended December 28, 2025, compared to the prior year. Operational cost management actions have resulted in a leaner cost structure, which strategically positions us to drive strong profitability as industry demand rebounds. SG&A expense in the current year included a benefit, net of related fees, of $5.4 million for recognition of certain COVID-19 government subsidies, compared to a benefit of $6.8 million included in the prior year. SG&A expense in fiscal year 2024 included $6.4 million of accelerated third-party licensing fees associated with the previous version of our JobStack®app.
Depreciation and amortization
| (in thousands, except percentages) | 2025 | 2024 | ||||||
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Depreciation and amortization (exclusive of depreciation included in cost of services)
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$ | 24,823 | $ | 28,624 | ||||
| Percentage of revenue | 1.5 | % | 1.8 | % | ||||
Depreciation and amortization decreased for the fiscal year ended December 28, 2025, compared to the prior year, as depreciation of certain software within PeopleSolutions has been included in cost of services on our Consolidated Statements of Operations and Compressive Income (Loss). Additionally, certain customer relationship intangible assets were fully amortized during fiscal 2024. This decrease was partially offset by amortization of intangible assets related to our acquisition of Healthcare Staffing Professionals, Inc. in early fiscal 2025.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Goodwill and intangible asset impairment charge
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(in thousands)
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2025 | 2024 | ||||||
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Goodwill and intangible asset impairment charge
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$ | 200 | $ | 59,674 | ||||
We performed our annual impairment test as of the first day of our fiscal second quarter of 2025. As a result of this impairment test, we concluded that a trademark related to our PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.2 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 28, 2025. The charge was primarily driven by an increase in the discount rate. The remaining balance for this trademark was $2.5 million as of December 28, 2025. See Note 6:Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details.
Right-of-use and other long-lived asset impairment charge
| (in thousands) | 2025 | 2024 | ||||||
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Right-of-use and other long-lived asset impairment charge
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$ | 18,366 | $ | - | ||||
The execution of a sublease related to our Chicago support center in the fiscal fourth quarter of 2025 required us to reevaluate the related long-lived asset group and test this asset group for recoverability and impairment. The sublease was executed as part of our continued efforts to shift to a remote or hybrid work model for our headquarters and U.S.-based support teams. The Chicago support center asset group consists of the right-of-use asset, and related leasehold improvements and furniture. As a result of this impairment test, we concluded that the carrying value of the related asset group exceeded its estimated fair value and we recorded a non-cash impairment charge of $18.4 million, which was included in right-of-use and other long-lived asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 28, 2025. See Note 9:Commitments and Contingencies, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details.
Income taxes
| (in thousands, except percentages) | 2025 | 2024 | ||||||
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Loss before tax expense
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$ | (45,631) | $ | (88,524) | ||||
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Income tax expense
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$ | 2,329 | $ | 37,224 | ||||
| Effective income tax rate | (5.1) | % | (42.0) | % | ||||
Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income or loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, valuation allowances recorded on deferred tax assets, 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 or loss. For example, the impact of discrete items, tax credits, non-deductible expenses and valuation allowance on our effective tax rate can be greater when our pre-tax income or loss is lower.
For the fiscal year ended December 28, 2025, our income tax expense is related primarily to our foreign operations. We continue to maintain a valuation allowance against our U.S. federal, state and certain foreign deferred tax assets, initially established in the fiscal second quarter of 2024, resulting in no income tax benefit for these jurisdictions. Our conclusion to maintain a valuation allowance was driven by U.S. and certain foreign pre-tax losses beginning in fiscal 2023 and continuing through fiscal 2025, combined with the significant non-cash goodwill impairment charge of $59.1 million recorded during the fiscal year ended December 29, 2024.
See Note 1: Summary of Significant Accounting Policiesand Note 13: Income Taxes, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional information.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Segment performance
We evaluate segment 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 and other income (expense), income taxes, and other costs and benefits not considered to be ongoing. See Note 15: Segment Information, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our reportable segments, including a reconciliation of segment profit to loss before tax expense (benefit).
Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and may not be comparable to similarly titled measures of other companies.
PeopleReady segment performance was as follows:
| (in thousands, except percentages) | 2025 | % of revenue | 2024 | % of revenue | ||||||||||
| Revenue from services | $ | 883,887 | $ | 868,549 | ||||||||||
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Cost of services
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661,586 | 74.9 | % | 614,860 | 70.8 | % | ||||||||
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Selling, general and administrative expense
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215,767 | 24.4 | % | 247,906 | 28.5 | % | ||||||||
| Segment profit | $ | 6,534 | 0.7 | % | $ | 5,783 | 0.7 | % | ||||||
PeopleReady segment profit grew $0.8 million and remained unchanged as a percentage of revenue for the fiscal year ended December 28, 2025, compared to the prior year. This was primarily due to operational cost management actions, which have resulted in a more efficient cost structure, as well as growth within our skilled businesses, specifically in the energy industry. These were partially offset by higher workers' compensation costs driven by less favorable workers' compensation reserve adjustments.
PeopleManagement segment performance was as follows:
| (in thousands, except percentages) | 2025 | % of revenue | 2024 | % of revenue | ||||||||||
| Revenue from services | $ | 544,448 | $ | 542,201 | ||||||||||
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Cost of services
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460,004 | 84.5 | % | 456,096 | 84.1 | % | ||||||||
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Selling, general and administrative expense
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66,672 | 12.2 | % | 70,986 | 13.1 | % | ||||||||
| Segment profit | $ | 17,772 | 3.3 | % | $ | 15,119 | 2.8 | % | ||||||
PeopleManagement segment profit grew $2.7 million and grew as a percentage of revenue for the fiscal year ended December 28, 2025, compared to the prior year. Growth was primarily driven by higher revenue from our commercial driving business, coupled with a reduction in SG&A expense, which was the result of disciplined cost management actions to simplify and streamline our organizational structure to improve efficiency.
PeopleSolutions segment performance was as follows:
| (in thousands, except percentages) | 2025 | % of revenue | 2024 | % of revenue | ||||||||||
| Revenue from services | $ | 187,662 | $ | 156,643 | ||||||||||
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Cost of services
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125,184 | 66.7 | % | 91,484 | 58.4 | % | ||||||||
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Selling, general and administrative expense
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51,146 | 27.3 | % | 53,007 | 33.8 | % | ||||||||
| Segment profit | $ | 11,332 | 6.0 | % | $ | 12,152 | 7.8 | % | ||||||
PeopleSolutions segment profit declined $0.8 million and declined as a percentage of revenue for the fiscal year ended December 28, 2025, compared to the prior year. The declines were primarily due to changes in revenue mix, the effects of which were softened by our cost management actions.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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FISCAL 2024 AS COMPARED TO FISCAL 2023
See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, found in Part II of the Annual Report on Form 10-K for the fiscal year ended December 29, 2024 for discussion of fiscal 2024 compared to fiscal 2023.
FUTURE OUTLOOK
The following highlights represent our operating outlook. These expectations are subject to revision as our business changes with the overall economy.
Operating outlook
•For the fiscal first quarter of 2026, we expect revenue to grow between 3% and 9% as compared to the same period in the prior year. The growth includes approximately 1% growth from the acquisition of Healthcare Staffing Professionals, Inc.
•For the fiscal first quarter of 2026 we anticipate gross profit as a percentage of revenue to decline between 350 and 310 basis points as compared to the same period in the prior year, primarily due to prior year workers' compensation reserve adjustments not expected to repeat at the same level.
•For the fiscal first quarter of 2026, we anticipate SG&A expense to be between $86 million and $90 million, representing improvement compared to the same period in the prior year, and the result of our ongoing cost management efforts.
•For the fiscal first quarter of 2026 we expect basic weighted average shares outstanding to be approximately 30 million. This expectation does not include the impact of potential share repurchases.
•For fiscal 2026, we expect income tax expense between $1 million and $5 million, which is lower than historical levels due to the valuation allowance against our U.S. federal, state and certain foreign deferred tax assets.
Liquidity outlook
•For fiscal 2026, capital expenditures and capitalized costs associated with the development of software as a service assets are expected to be between $13 million and $17 million, with approximately $1 million of this amount relating to spending for software as a service assets.
LIQUIDITY AND CAPITAL RESOURCES
We believe we have a strong financial position and sufficient sources of funding to meet our short- and long-term obligations. As of December 28, 2025, we had $24.5 million in cash and cash equivalents and $65.8 million debt outstanding. Under the Revolving Credit Facility, an additional $11.4 million was utilized by outstanding standby letters of credit, leaving $177.8 million unused, of which $67.6 million is available for additional borrowing after considering our most restrictive covenant. See Note 8: Long-Term Debt, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our Revolving Credit Facility.
On January 30, 2026, we entered into a second amendment to our credit agreement ("Second Amendment"). The Second Amendment reduces our line of credit from $255 million to $175 million, while retaining our option to increase the amount by $150 million, subject to lender approval, with no changes in Swingline sub-limits, letters of credit sub-limits, interest rate pricing or the maturity date. The Second Amendment converts the Revolving Credit Facility from a cash-flow based revolving credit facility to an asset-based lending facility by replacing the existing structure of a revolving commitment with availability subject to a borrowing base and a minimum excess availability covenant. The minimum excess availability covenant may subsequently be replaced with a springing fixed charge coverage ratio covenant upon the satisfaction of meeting a minimum fixed charge coverage ratio test for two consecutive quarters occurring on or after September 27, 2026. The fixed charge coverage ratio covenant will thereafter apply when Excess Availability (as defined in the Second Amendment) is below certain thresholds.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Cash generated through our core operations is generally our primary source of liquidity. Our principal ongoing cash needs are to finance working capital, fund capital expenditures, repay outstanding Revolving Credit Facility balances and execute share repurchases. We may also need cash to fund future acquisitions. We manage working capital through timely collection of accounts receivable, which we achieve through focused collection efforts and tightly monitoring trends in days sales outstanding. While client payment terms are generally 90 days or less, we pay our associates daily and weekly, so additional financing through the use of our Revolving Credit Facility is sometimes necessary to support working capital needs in times of revenue growth. We also manage working capital through efficient cost management and strategically timing payments of accounts payable.
We continue to make investments in online and mobile apps to increase the competitive differentiation of our services long-term and improve the efficiency of our service delivery model. In addition, we continue to transition our technology from on-premise software platforms to cloud-based software solutions, to increase automation and the efficiency of running our business.
Outside of ongoing cash needed to support core operations, our insurance carriers and certain state workers' compensation programs require us to collateralize a portion of our workers' compensation obligation, for which they become responsible should we become insolvent. On a regular basis, these entities assess the amount of collateral they will require from us relative to our workers' compensation obligation. Such amounts can increase or decrease independent of our assessments and reserves. We continue to have risk that these collateral requirements may be increased by our insurers due to our loss history and market dynamics. We generally anticipate that our collateral commitments will grow as our business grows. We pay our premiums and deposit our collateral, if required, in installments. The collateral typically takes the form of cash and cash-backed instruments, highly rated investment grade securities, letters of credit and surety bonds. Restricted cash, cash equivalents and investments supporting our self-insured workers' compensation obligation are held in a trust at the Bank of New York Mellon ("Trust") and are used to pay workers' compensation claims as they are filed. See Note 7: Workers' Compensation Insurance and Reserves, and Note 4:Restricted Cash, Cash Equivalents and Investments, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our workers' compensation program as well as the restricted cash, cash equivalents and investments held in Trust.
We have established investment policy directives for the Trust with the first priority to preserve capital, second to ensure sufficient liquidity to pay workers' compensation claims, third to 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 | ||||||||
Total collateral commitments decreased $45.5 million during the fiscal year ended December 28, 2025 primarily due to the use of collateral to satisfy workers' compensation claims, as well as a decrease in collateral levels required by our insurance carriers, consistent with the $43.0 million decrease in workers' compensation claims reserve. See Note 9:Commitments and Contingencies, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our workers' compensation commitments. We continue to actively manage workers' compensation costs by focusing on improving our associate safety programs and actively control costs with our network of service providers. These actions have had a positive impact creating favorable adjustments to workers' compensation liabilities recorded in the prior periods, as well as lowering our required collateral levels. Continued favorable adjustments to our prior year workers' compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims. Due to our progress in worker safety improvements and the resulting reduction in the frequency and severity of accident rates, we expect diminishing favorable adjustments to our workers' compensation liabilities going forward.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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The following table provides an analysis of changes in our workers' compensation claims reserves:
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Fiscal year ended
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| (in thousands) | Dec 28, 2025 | Dec 29, 2024 | ||||||
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Beginning balance
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$ | 139,792 | $ | 196,515 | ||||
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Self-insurance reserve expenses related to current year, net
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34,917 | 36,694 | ||||||
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Cash payments related to current year claims
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(12,557) | (9,135) | ||||||
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Cash payments related to claims from prior years
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(32,727) | (32,976) | ||||||
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Changes to prior years' self-insurance reserve, net
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(19,574) | (35,409) | ||||||
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Amortization of prior years' discount (1)
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(123) | 298 | ||||||
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Net change in excess claims reserve (2)
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(12,984) | (16,195) | ||||||
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Ending balance
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96,744 | 139,792 | ||||||
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Less current portion
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24,193 | 34,729 | ||||||
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Long-term portion
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$ | 72,551 | $ | 105,063 | ||||
(1)The discount is amortized over the estimated weighted average life. In addition, any changes to the estimated weighted average lives and corresponding discount rates for actual payments made are reflected in cost of services on the Consolidated Statement of Operations and Comprehensive Income (Loss) in the period when the changes in estimates are made.
(2)Changes to our claims above our self-insured limits ("excess claims") are discounted to an estimated net present value using the risk-free rates associated with the actuarially determined weighted average lives of our excess claims.
Restricted cash, cash equivalents and investments also includes collateral to support our non-qualified deferred compensation plan in the form of company-owned life insurance policies. Our non-qualified deferred compensation plan is managed by a third-party service provider, and the investments backing the company-owned life insurance policies align with the amount and timing of payments based on employee elections.
A summary of our cash flows for each period are as follows:
|
Fiscal year ended
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| (in thousands) | Dec 28, 2025 | Dec 29, 2024 | ||||||
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Net cash used in operating activities
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$ | (58,042) | $ | (17,058) | ||||
| Net cash used in investing activities | (16,062) | (2,453) | ||||||
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Net cash provided by (used in) financing activities
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57,143 | (17,087) | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents | (119) | (1,608) | ||||||
| Net change in cash, cash equivalents and restricted cash and cash equivalents | $ | (17,080) | $ | (38,206) | ||||
Cash flows from operating activities
Operating cash flows consist of net loss adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.
As client demand improves, the result is generally an increase in accounts receivable and accounts payable. 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 used by accounts receivable during the fiscal year ended December 28, 2025 was primarily due to increased revenue, as well as an increase in days sales outstanding of approximately two days compared to fiscal year ended December 29, 2024, primarily due to a shift in business mix towards clients with longer payment terms. Net cash used for payments on accounts payable and other accrued expenses was primarily related to timing of payments to vendors. In addition, our workers' compensation claims reserve decreases as claims are paid, and as a result of favorable adjustments of prior year reserves, both of which were the case in the current period.
Cash flows from investing activities
Investing cash flows consist of capital expenditures, cash used for business acquisitions, net proceeds from divestitures, 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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The primary use of cash for investing activities during the fiscal year ended December 28, 2025 was the acquisition of Healthcare Staffing Professionals, Inc. Capital expenditures included continued investments to upgrade our PeopleReady on-demand technology platform. Cash used was partially offset by cash provided by maturities of restricted investments, which were not reinvested due to lower workers' compensation collateral requirements.
Cash flows from financing activities
Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, the net change in our Revolving Credit Facility, and proceeds from the sale of common stock through our employee stock purchase plan.
Net cash provided by financing activities during the fiscal year ended December 28, 2025 was due to draws on our Revolving Credit Facility, primarily to fund the acquisition of Healthcare Staffing Professionals, Inc. and to finance working capital needs as revenue increased. While we have not executed share repurchases during the fiscal year ended December 28, 2025, $33.5 million remains available for repurchase under existing authorization as of December 28, 2025. We are limited to $25.0 million in aggregate share repurchases in any twelve-month period by our financial covenants.
FISCAL 2024 AS COMPARED TO FISCAL 2023
See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, found in Part II of the Annual Report on Form 10-K for the fiscal year ended December 29, 2024 for discussion of fiscal 2024 compared to fiscal 2023.
SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
Management's discussion and analysis of financial condition and results of operations discusses our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management believes that the following accounting estimates are the most critical to understand and evaluate our reported financial results, and they require management's most subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual future amounts differing from reported estimated amounts.
Workers' compensation reserve
We maintain reserves for workers' compensation claims, including the estimated expenses related to claims above our self-insured limits ("excess claims"), using actuarial estimates of the future cost of claims and related expenses. These estimates include claims that have been reported but not settled and claims that have been incurred but not reported. These reserves, which reflect potential liabilities to be paid in future periods based on estimated payment patterns, are discounted to 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, which are evaluated on a quarterly basis. We evaluate the reserves regularly throughout the year and make adjustments accordingly. If the actual cost of such claims and related expenses exceed the amount estimated, additional reserves may be required. Changes in reserve estimates are reflected in cost of services on the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period when the changes in estimates are made.
Our workers' compensation reserves include estimated expenses related to excess claims and a corresponding receivable for the insurance coverage on excess claims based on the contractual policy agreements we have with insurance companies. We discount this reserve and corresponding receivable to its estimated net present value using the discount rates based on average returns on "risk-free" U.S. Treasury instruments available during the year in which the liability was incurred. When appropriate, we record a valuation allowance against the insurance receivable to reflect amounts that may not be realized.
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There are two main factors that impact workers' compensation cost: the number of claims and the cost per claim. The number of claims is driven by the volume of hours worked, the business mix, which reflects the type of work performed, and the safety of the environment where the work is performed. The cost per claim is driven primarily by the severity of the injury, the state in which the injury occurs, related medical costs and lost-time wage costs. For fiscal 2025 claims, a 5% change in one or more of the above factors would result in a change to workers' compensation cost of approximately $2 million. Our reserve balances have been positively impacted primarily by the success of our accident prevention programs, our focus on resolving open claims in a timely manner, as well as shifts in business mix. In the event that we are not able to further reduce our accident rates or resolve open claims in a timely manner, the positive impacts to our reserve balance will diminish.
Management evaluates the adequacy of the workers' compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered by management, along with our third-party actuary and third-party administrator, 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;
•impact of safety initiatives; and
•positive or adverse development of claims.
Accounts receivable allowance for credit losses
Accounts receivable are recorded at the invoiced amount. We establish an estimate for the allowance for credit losses resulting from the failure of our clients to make required payments by applying an aging schedule to pools of assets with similar risk characteristics. Based on an analysis of the risk characteristics of our clients and associated receivables, we have concluded our pools are as follows:
•PeopleReady (excluding RenewableWorks) has a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable.
•Centerline Drivers ("Centerline") has a mix of client sizes, many with low dollar weekly invoices, but other clients that are invoiced on a consolidated basis, resulting in a high concentration of revenue related to its top 10 clients. Payment terms are slightly longer than PeopleReady.
•Our PeopleScout and HSP brands have a smaller number of clients in a variety of industries and are generally invoiced monthly on a consolidated basis. Invoice amounts are generally higher for these brands than our other businesses, with longer payment terms than PeopleReady and Centerline. These businesses also have significant balances due from governmental entities.
•Our Staff Management | SMX and SIMOS Insourcing Solutions brands have a smaller number of clients and follow a contractual billing schedule. These clients generally operate in the manufacturing, warehousing and distribution industries and have longer payment terms than our other businesses.
•Our RenewableWorks brand has a small number of large clients that operate in the energy industry, generally with high dollar invoices, and follows a contractual billing schedule. Payment terms are slightly longer than most of our other businesses.
When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk and current economic data. Management has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets. The allowance for credit loss is reviewed and represents our best estimate of the amount of expected credit losses. Past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the allowance for credit losses are recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).
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Business combinations
We account for our business acquisitions using the acquisition method of accounting. The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Determining the fair value of the assets acquired and liabilities assumed is judgmental in nature and involves the use of significant estimates and assumptions. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets, useful lives of property and equipment, and amortizable lives for acquired intangible assets. Intangible assets that arise from contractual/legal rights, or are capable of being separated, are measured and recorded at fair value and amortized over the estimated useful life. If practicable, assets acquired and liabilities assumed arising from contingencies are measured and recorded at fair value. If not practicable, such assets and liabilities are measured and recorded when it is probable that a gain or loss has occurred and the amount can be reasonably estimated. The residual balance of the purchase price, after fair value allocations to all identified assets and liabilities, represents goodwill.
Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. Acquisition-related costs are expensed as incurred. Our acquisitions may include contingent consideration, which requires us to recognize the fair value of the estimated liability at the time of the acquisition. Subsequent changes in the estimate of the amount to be paid under the contingent consideration arrangement are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss). Cash payments to settle the contingent consideration liability within a relatively short period of time after the acquisition is completed are classified as investing activities in the Consolidated Statements of Cash Flows. Cash payments to settle the contingent consideration liability up to the acquisition date fair value (including measurement period adjustments) that are not within a relatively short period of time are recorded as financing activities in the Consolidated Statements of Cash Flows. Cash payments to settle contingent consideration liability in excess of the acquisition date fair value (including measurement period adjustments) are recorded as operating activities in the Consolidated Statements of Cash Flows. Alternatively, our acquisitions may include contingent payments to employees that are selling shareholders, which are separate from the business combination and are accounted for as compensation expense.
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, 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 general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, changes in the carrying amount of net assets, sale or disposition of a significant portion of a reporting unit, or a sustained decrease in stock 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 reporting units to be our operating segments or one level below that (the component level) based on our organizational structure. Effective March 31, 2025 (the first day of our fiscal second quarter of 2025), we combined our PeopleScout RPO and PeopleScout MSP reporting units into one reporting unit, PeopleScout. This change coincided with the elimination of PeopleScout MSP as an operating segment within the PeopleSolutions reportable segment. Immediately before the combination, we tested the PeopleScout RPO reporting unit, with a remaining goodwill balance of $22.4 million, and the PeopleScout MSP reporting unit, with a remaining goodwill balance of $0.8 million, for impairment. The PeopleScout RPO reporting unit's fair value was substantially in excess of its carrying value, and the PeopleScout MSP reporting unit's fair value approximated its carrying value. After combining the reporting units, the fair value of the PeopleScout reporting unit was substantially in excess of its carrying value. As a result, no impairment charge was recognized. Our reporting units with remaining goodwill as of December 28, 2025 were Centerline, PeopleScout and HSP.
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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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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 exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value of the goodwill. We consider a reporting unit's fair value to be substantially in excess of its carrying value at a 20% premium or greater.
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 economic changes on each reporting unit. We estimate the fair value using a weighting 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. We also apply a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, 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.
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.
Impairment test
We performed our annual impairment test as of the first day of our fiscal second quarter of 2025. The weighted average cost of capital used in our most recent impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 14.5% to 16.5%. The combined fair values for all reporting units were then reconciled to the aggregate market value of our shares of common stock on the date of valuation.
Based on the results of our annual impairment test, all of our reporting units' fair values were substantially in excess of their respective carrying values, except for HSP, for which the estimated fair value was in excess of its carrying value by approximately 5%. This level of headroom is expected, due to the short amount of time that has passed between the acquisition date, when the carrying value of the reporting unit approximated its fair value, and our annual impairment test as of the first day of our fiscal second quarter of 2025. A discount rate of 15.5% was used in calculating the fair value of the HSP reporting unit. In the event either the discount rate increases, forecasted revenue growth declines, or gross profit as a percentage of revenue declines by less than 1 percentage point, the carrying value of the reporting unit would exceed its fair value. Any significant adverse change in our near- or long-term projections or macroeconomic conditions could result in future impairment charges. The goodwill balance for HSP as of December 28, 2025 was $17.3 million. We will continue to closely monitor the operational performance of this reporting unit.
Additionally, following performance of the annual impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 28, 2025. See Note 6:Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2025, 2024 and 2023 goodwill impairment.
Indefinite-lived intangible assets
We have indefinite-lived intangible assets for trademarks related to businesses within our PeopleSolutions and PeopleManagement segments. 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.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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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 asset 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 asset 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 trademarks. If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including forecasted future revenue, royalty rates and appropriate discount rates.
Impairment test
As a result of our annual impairment test as of the first day of our fiscal second quarter of 2025, we concluded that a trademark related to the PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.2 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 28, 2025. The charge was primarily driven by an increase in the discount rate of 1.0% since our last impairment test. The remaining balance for this trademark was $2.5 million as of December 28, 2025. As of our impairment testing date, the fair value of the trademark related to the PeopleSolutions segment was in excess of its carrying amount of $2.1 million, and therefore did not result in an impairment.
Additionally, following performance of the impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 28, 2025. See Note 6:Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2025, 2024 and 2023 indefinite-lived intangible asset impairment.
Finite-lived intangible assets and other long-lived assets
We review intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset group may not be recoverable. Important factors that could result in an impairment review include, but are not limited to, significant underperformance relative to historical or planned operating results, or significant changes in business strategies. We estimate the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that we expect the asset to generate. An impairment charge is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment charge is recognized, the carrying amount of the asset is reduced to its estimated fair value based on discounted cash flow analysis or other valuation techniques.
Impairment test
Following the coronavirus pandemic, the company shifted to a remote or hybrid work model for our headquarters and U.S.-based support teams, reducing the need for corporate office space. As a result, on October 6, 2025, we executed a sublease for our Chicago support center, which was approved by the landlord on October 28, 2025. The sublessee is expected to take possession of the space on April 1, 2026, and the sublease will remain in effect for the duration of the original lease term, concluding on June 29, 2036.
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Execution of the sublease required us to reevaluate the long-lived asset group for the Chicago support center and test the new asset group for recoverability and impairment during the fiscal fourth quarter of 2025. The Chicago support center asset group consists of the operating lease right-of-use asset, and related property and equipment, including leasehold improvements and furniture. We determined that the carrying value of the asset group, which was $23.5 million as of the measurement date, was not recoverable based on the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. Therefore, we performed an impairment analysis. To perform this analysis, we estimated the fair value of the asset group using the income approach, specifically a discounted cash flow valuation technique. The valuation incorporated the terms of our executed sublease, which were determined to reflect market-based terms, and a discount rate of 9.0%. As of the measurement date, we concluded that the carrying value of the asset group exceeded its estimated fair value and we recorded a non-cash impairment charge of $18.4 million, which was included in right-of-use and other long-lived asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 28, 2025. The impairment was allocated to the assets within the asset group using a pro-rata method based on relative carrying values, with $13.0 million allocated to operating lease right-of-use assets, net, and the remaining $5.4 million allocated to property and equipment, net, on our Consolidated Balance Sheets, which included leasehold improvement impairment of $5.2 million and furniture impairment of $0.2 million.
Additionally, following performance of the impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 28, 2025. See Note 9:Commitments and Contingencies, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2025 right-of-use and other long-lived asset impairment charge. There were no additional finite-lived intangible asset or other long-lived asset impairment charges recorded during fiscal 2025.
There were no material finite-lived intangible asset or other long-lived asset impairment charges recorded during fiscal 2024 or 2023.
Estimated contingent legal and regulatory liabilities
We are subject to compliance audits by federal, state, local and foreign authorities relating to a variety of regulations including wage and hour laws, taxes, workers' compensation, immigration and safety. We are also subject to legal proceedings in the ordinary course of our operations. We have established reserves for contingent legal and regulatory liabilities. We record a liability when management determines that it is probable that a legal claim will result in an adverse outcome and the amount of liability can be reasonably estimated. To the extent that an insurance company or other third-party is legally obligated to reimburse us for a liability, we record a receivable for the amount of the probable reimbursement. We evaluate our estimated liability regularly throughout the year and make adjustments as needed. If the actual outcome of these matters is different than expected, an adjustment is charged or credited to expense in the period the outcome occurs or the period in which the estimate changes.
Income taxes and related valuation allowances
We account for income taxes by recording taxes payable or receivable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. These expected future tax consequences are measured based on provisions of tax law as currently enacted; the effects of future changes in tax laws are not anticipated. We recognize deferred tax assets to the extent we believe it is more likely than not the asset will be realized. We consider available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets when making such determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted and results of recent operations. A significant piece of objective negative evidence is the existence of a three-year cumulative loss. Such objective negative evidence limits the ability of management to consider other subjective evidence, such as projected taxable income. When appropriate, we record a valuation allowance against deferred tax assets to reduce deferred tax assets to the amount that is more likely than not to be realized.
During the year ended December 28, 2025, we performed our deferred tax asset realizability assessments and, as a result, we maintained a valuation allowance against our U.S. federal, state and certain foreign deferred tax assets. Our conclusion was driven by U.S. and certain foreign pre-tax losses beginning in 2023 and continuing into 2025, combined with the non-cash goodwill impairment charge of $59.1 million recorded during fiscal 2024. See Note 13: Income Taxes, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our current valuation allowance.
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NEW ACCOUNTING STANDARDS
See Note 1: Summary of Significant Accounting Policies,to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
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