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Item 7. Management’s Discussion and Analysis

2022-02-16 compared with 2021-02-22 · 223 added, 366 removed, 347 unchanged (63% of the section changed)

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PeopleReady, PeopleManagement and PeopleScout.

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K for additional details on our operating segments and reportable segments.

Our PeopleReady segment offers on-demand, industrial staffing;

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and our PeopleScout segment offers recruitment process outsourcing (“RPO”) and managed service provider (“MSP”) solutions.

Beginning in March 2020 , jurisdictions across the countries we serve began implementing restrictions to protect public health as the impact of COVID-19 set in.

Many of our clients temporarily halted or reduced operations which had a significant impact on our revenue.

However, t hroughout the pandemic, our business has remained open and provided key services to essential businesses and other businesses as COVID-19 restrictions were lifted.

Nevertheless, the preventative measures and individual precautions taken to help curb the spread of COVID-19, and the resulting negative impact on the economy, continue to have an adverse impact on client demand for our services and our business results.

Our first priority continues to be the health and safety of our associates, employees, clients, suppliers and others with whom we partner in our business activities.

We implemented comprehensive measures across our businesses to keep our associates, employees and clients healthy and safe, including adherence to guidance from the Centers for Disease Control and Prevention, World Health Organization, Occupational Safety and Health Administration and other key authorities.

In response to the rapidly changing market conditions as a result of COVID-19, commencing in April 202 0, w e took actions to reduce our operating expenses while preserving the key strengths of our business to ensure we were pre pared as business conditions improved.

Our cost management strategies are on track and continue to improve our operating results and preserve our liquidity.

At this time, we have ample liquidity to satisfy our cash needs.

However, the long-term impacts of the pandemic are difficult to predict.

Accordingly, we will continue to evaluate the nature and extent of the impact of COVID-19 on our business, consolidated results of operations, financial condition, and liquidity.

We continue to monitor this evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations.

There may be developments outside our control requiring us to adjust our operating plan.

As such, it is difficult to estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K for additional details on our operating segments and reportable segments.

The COVID-19 pandemic

Beginning in early 2020, the coronavirus pandemic (“COVID-19”) has led to a series of significant economic disruptions globally.

Throughout the pandemic, our business has remained open and we have continued to provide key services to essential and nonessential businesses as COVID-19 restrictions have lifted.

Consistent with the global pandemic response, in our two largest markets, the United States of America (“U.S.”) and Canada, vaccinations continue to be a top public health policy priority and are being supported by governmental organizations.

As of January 31, 2022, approximately 64% of the U.S.

and 79% of the Canadian populations have been fully vaccinated.

While the vaccination programs have helped to reopen these markets, we continue to monitor the pandemic’s evolution closely.

Despite an uneven recovery in certain markets and industries, we are seeing growth in new client wins and higher existing client volumes, particularly in those markets and industries hit hardest by COVID-19.

In addition, our continued focus on efficiently managing costs while investing in digital strategies and sales resources has allowed us to accelerate our strategic priorities and emerge stronger as the economy recovers.

For additional discussion on the uncertainties and business risks associated with COVID-19, refer to Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K.

On March 27, 2020, the United States (“U.S.”) government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak and options to defer payroll tax payments for a limited period.

Based on our evaluation of the CARES Act, we qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments into the future.

Additionally, the Canadian government enacted the Canada Emergency Wage Subsidy and the Australian government enacted the JobKeeper subsidy to help employers offset a portion of their employee wages for a limited period of time.

For the year ended December 27, 2020, we recognized $9.9 million in government subsidies and delayed payments of $57.1 million for the employer portion of social security taxes.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Revenue from services

Total company revenue declined 22.1% to $1.8 billion for the year ended December 27, 2020, compared to the prior year.

The decline was due to a drop in client demand associated with government and societal actions taken to address COVID-19, which had severe adverse impacts on our operations and business results.

Many of our clients have been severely impacted by COVID-19, which has resulted in reduced demand for our services.

We saw steady improvements in our year-over-year revenue trends since the second quarter of 2020.

Revenue declined 39.0% in the second quarter, 25.5% in the third quarter and 12.3% in the fourth quarter.

These improvements were broad-based across most of the industries and geographies we serve.

PeopleReady, our largest segment, experienced a revenue decline of 25.4%, compared to the prior year.

PeopleReady’s clients have been severely impacted by COVID-19, which has resulted in reduced demand for our services.

The impact of COVID-19 on PeopleReady’s clients has moderated in the third and fourth quarters of 2020.

PeopleManagement, our lowest margin segment, experienced a revenue decline of 8.6%, compared to prior year.

PeopleManagement supplies an outsourced workforce that involves multi-year, multi-million dollar on-site or driver relationships.

These types of client engagements are often more resilient in an economic downturn.

PeopleScout, our highest margin segment, experienced revenue decline of 36.6%, compared to the prior year.

PeopleScout has a large number of clients in the travel and leisure industries which continue to be disproportionately impacted by COVID-19 .

Total company gross profit as a percentage of revenue for the year ended December 27, 2020 was 23.9%, compared to 26.2% for the prior year.

Our staffing businesses contributed approximately 140 basis points of the decline due to approximately 100 basis points from pressure on our bill and pay rates caused by higher pay rates to entice associates to take work assignments given COVID-19 health concerns and the availability of additional federal unemployment benefits.

As with prior recessions, our ability to pass through higher costs plus a markup in our bill rates was hampered due to a variety of economic factors negatively impacting our clients.

This decline was partially offset by a benefit of 30 basis points from a reduction in estimated costs to comply with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively the “ACA”), which were accrued in prior fiscal years.

Our PeopleScout business contributed approximately 90 basis points to the decline due to client mix and lower volume driven by the rapid revenue decline, which outpaced the reductions to our service delivery team, and severance of approximately 20 basis points.

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

Total company SG&A expense decreased by $108.0 million to $408.3 million, or 22.1% of revenue for the year ended December 27, 2020, compared to $516.2 million, or 21.8% of revenue for the prior year.

The decrease in SG&A expense was primarily due to comprehensive actions we put in place beginning in April 2020 to dramatically reduce costs in response to rapidly changing market conditions due to COVID-19.

These actions reduced SG&A expense by 20.9% for the year ended December 27, 2020, compared to the prior year.

We believe we have taken the right actions to reduce SG&A expense, while still investing in technology and preserving the key strengths of our business to ensure we are prepared as business conditions improve.

The decrease in SG&A expense benefited from $8.6 million of employee retention subsidies made available under the Canada Emergency Wage Subsidy and the Australian JobKeeper subsidy, as well as a U.S.

payroll tax credit in accordance with the provisions of the CARES Act.

These reductions were partially offset by a $2.8 million one-time discretionary bonus rewarding our employees for their efforts in 2020, and $8.9 million in workforce reduction costs recorded in the year ended December 27, 2020, compared to $3.3 million in workforce reduction costs recorded in the prior year.

Loss from operations

Total company loss from operations was $174.9 million for the year ended December 27, 2020, compared to income from operations of $66.2 million for the prior year.

The decrease in income from operations was primarily due to a goodwill and intangible asset impairment charge of $175.2 million in the first quarter of 2020 and the significant decline in client demand associated with government and societal actions taken to address COVID-19.

The significant drop in demand, increased price sensitivity, increased associate wages, and preventive measures taken to help curb the spread of COVID-19, had severe adverse impacts on our operations and business results.

The declines were partially offset by the decisive and comprehensive cuts to SG&A expense in line with management’s plans to preserve the key strengths of our business.

Total company revenue grew 17.7% to $2.2 billion for the fiscal year ended December 26, 2021, compared to the prior year.

The increase was due to the recovery of client demand for our services, which experienced a significant drop in the prior year due to the negative impact of COVID-19.

This increase is primarily driven by improving volumes from existing clients, including clients in industries that were disproportionately impacted by COVID-19, as well as new client wins.

• PeopleReady, our largest segment by revenue, experienced revenue growth of 15.6% to $1.3 billion for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleReady has seen a steady recovery across most geographies and industries during the year, especially those industries that were hit the hardest by COVID-19, such as hospitality, retail, transportation, and manufacturing.

The growth in client demand for our services was partially offset by a shortage in the supply of workers that we believe has been temporarily impacted by both COVID-19 and the governmental responses to COVID-19, which have included stimulus checks, elevated federal unemployment benefits, accelerated payments of the child tax credit, and other direct payments to individuals.

As compared to our other segments, PeopleReady experienced the most pressure on the available supply of workers, primarily due to a lower average wage, the temporary nature of the positions, and the shorter notice period we receive to fill open positions.

However, as workers began to exit federal and state unemployment programs late in the fiscal third quarter, we saw gradual improvement in the supply of workers through the end of fiscal 2021.

• PeopleManagement, our second largest segment by revenue, experienced revenue growth of 9.0% to $639.7 million for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleManagement growth was due to significant new client wins, which contributed approximately $30 million of revenue for fiscal 2021.

However, the pace of revenue recovery was adversely impacted by worker supply and supply chain related production slowdowns in key industries, such as manufacturing and retail.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Net loss was $141.8 million, or $4.01 per diluted share for the year ended December 27, 2020, compared to net income of $63.1 million, or $1.61 per diluted share for the prior year.

The net loss includes an income tax benefit of $31.4 million, $23.3 million of which was due to the goodwill and intangible asset impairment, resulting in an effective tax rate of 18.1%, compared to 10.0% in the prior year.

Our effective tax rate was lower in the prior year as a result of the federal Work Opportunity Tax Credit (“WOTC”) reducing the tax expense, while increasing the tax benefit in 2020.

WOTC is designed to encourage employers to hire associates from certain targeted groups with higher than average unemployment rates.

• PeopleScout, our smallest segment by revenue but highest margin segment, experienced revenue growth of 64.3% to $263.0 million for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleScout has seen a strong recovery of volume from existing clients, especially those in industries that were hit hardest by COVID-19, such as travel and leisure, some of which are back to pre-pandemic hiring levels.

In addition, new client wins contributed approximately $28 million of revenue for fiscal 2021 within a variety of industries including retail, health care and transportation.

Total company gross profit as a percentage of revenue for the fiscal year ended December 26, 2021 improved 190 basis points to 25.8%, compared to 23.9% for the prior year.

Our PeopleReady and PeopleManagement business segments contributed approximately 90 basis points of improvement, primarily attributable to lower workers’ compensation expense as a result of a reduction to prior year reserves associated with favorable patterns in claim development.

Our PeopleScout business contributed the remaining 100 basis points of expansion from improved recruiter utilization on increasing volumes.

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

Total company SG&A expense increased by $56.0 million to $464.3 million, or 21.4% of revenue for the fiscal year ended December 26, 2021, compared to $408.3 million, or 22.1% of revenue for the prior year.

As volumes have recovered, variable and discretionary employee compensation levels have risen to reflect improved business performance.

However, f iscal 2021 benefited from the comprehensive actions we put in place during fiscal 2020 to reduce SG&A expense as a percentage of revenue in response to rapidly changing market conditions resulting from COVID-19.

We are better able to leverage our cost structure and run the company more efficiently today than we did prior to the pandemic, with SG&A expense as a percentage of revenue 40 basis points lower in fiscal 2021 as compared to fiscal 2019.

We were able to efficiently manage certain costs throughout fiscal 2021 based on fundamental changes in how we operate our business and le verage technology, while ensuring continued investment in sales resources and digital strategies as our business continues to recover.

Income from operations

Total company income from operations was $68.4 million, or 3.1% of revenue for the fiscal year ended December 26, 2021, compared to loss from operations of $174.9 million, or 9.5% of revenue for the prior year.

The loss from operations in 2020 was driven by a goodwill and intangible asset impairment charge of $175.2 million.

The increase in income from operations in 2021 was due to improving revenue trends led by recovering industry performance, including those disproportionately impacted by COVID-19, a series of new client wins, expanding gross margin, and efficiently managing our SG&A costs.

Net income was $61.6 million, or $1.74 per diluted share for the fiscal year ended December 26, 2021, compared to net loss of $141.8 million, or $4.01 per diluted share for the prior year.

Net income for fiscal 2021 includes income tax expense of $12.2 million resulting in an effective tax rate of 16.5%, compared to a benefit of $31.4 million resulting in an effective tax rate of 18.1% for the same period in the prior year.

The higher effective tax rate in the prior year was primarily due to the intangible asset impairment charge and the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

Other differences between our statutory tax rate of 21% and our effective income tax rate result primarily from hiring credits, including the Work Opportunity Tax Credit (“WOTC”), and state income taxes.

WOTC is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

The CARES Act was an emergency economic aid package to help mitigate the impact of COVID-19.

Among other things, the CARES Act provided certain changes to tax laws, including the ability to carry back losses to obtain refunds related to prior year tax returns where the federal tax rate was 35%.

Additional highlights

We are focused on cash management as a top priority.

In response to the rapidly changing market conditions as a result of COVID-19 , we have taken swift actions to reduce operating costs and other cash outflows to preserve working capital.

Additionally, on March 16, 2020, we amended our credit agreement which extended the maturity of the revolving credit facility established thereunder (“Revolving Credit Facility”) to March 16, 2025.

On June 24, 2020, we further amended our revolving credit agreement, which modified terms of our financial covenants as well as certain other provisions.

Under the amended credit agreement, we have the option, subject to lender approval, to increase the Revolving Credit Facility to $450.0 million.

As of December 27, 2020, we had cash and cash equivalents of $62.5 million and no outstanding debt resulting in an unused credit facility.

We also returned excess capital to shareholders by repurchasing $52.4 million or 9.2% of our common stock.

These purchases were initiated prior to the medical community’s acknowledgment of the expected severity of the impact of COVID-19.

RESULTS OF OPERATIONS

The global economy and our business have been dramatically affected by the COVID-19 pandemic.

We continue to monitor its impact on all aspects of our business.

Throughout the pandemic, our businesses have remained open.

We provided key services to essential businesses and other businesses as COVID-19 restrictions were lifted .

However, the preventative measures and precautions taken to help curb the spread of COVID-19 and the resulting negative impact on the economy, continue to have a severe adverse impact on client demand for our services and our business results.

Our first priority, with regard to COVID-19, has been to ensure the health and safety of our associates, employees, clients, suppliers and others with whom we partner in our business activities to continue our operations in this unprecedented environment.

We formed a specialized task force tracking the most up-to-date developments and safety standards, and created an internal information hub with safety protocols, dashboards, FAQs, and daily reporting by location on the impact of COVID-19.

In addition to posting TrueBlue’s action plan on our external websites, we are actively sharing information on how companies and workers can protect themselves via ongoing emails, social outreach, webinars and other digital communications.

PeopleReady is fully leveraging our JobStack TM app to help companies and associates connect safely through a digital environment, and are rolling out a new virtual onboarding capability to minimize in-person branch visits.

PeopleScout is also leveraging our Affinix TM technology to enable companies to connect with permanent talent through virtual hiring and sourcing.

Working closely with clients to enforce safety standards, we are supporting efforts in providing masks and hand sanitizer for associates, disinfecting workplaces, encouraging social distancing, and providing infrared temperature checks.

We instruct our associates and employees to stay home if they are not feeling well or have been exposed to COVID-19.

Immediate notification and self-quarantine protocols are in place if an employee, associate or client’s employee is exposed to COVID-19, and our Field Safety Specialists closely evaluate any assignments related to clean-up of potentially infectious job sites.

To ensure business continuity and support for clients who need associates for essential services, we established a Centralized Branch Support Center and are ready to implement Regional Command Centers as needed to serve as backup for our 600+ branches.

Our branches follow strict sanitation and social distancing guidelines.

In addition, across the TrueBlue organization, we suspended all international travel and restricted nonessential domestic travel for our employees and are providing remote work capabilities for our Tacoma and Chicago support centers as well as other locations.

In response to the rapidly changing market conditions as a result of COVID-19, we have taken steps to reduce SG&A expense and other cash outflows.

For additional discussion on the uncertainties and business risks associated with COVID-19, refer to Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K.

As of December 26, 2021, we are in a strong financial position with cash and cash equivalents of $49.9 million, no outstanding debt, and $293.8 million available under our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $343.7 million.

MANAGEMENT’S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

Total company results

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Revenue from services

We report our business as three reportable segments described in Note 14:

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K.

Revenue from services by reportable segment was as follows:

(in thousands, except percentages) 2020 Decline

(in thousands, except percentages) 2021 Growth

% Segment % of total 2020 Segment % of total

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Total company $ 2,173,622 17.7 % 100.0 % $ 1,846,360 100.0 %

The workforce solutions industry is dependent on the overall strength of the labor market.

Clients tend to use a contingent workforce to supplement their existing workforce and generally hire permanent employees when long-term demand is expected to increase.

As a consequence, our revenue from services tends to increase when the economy begins to grow.

Conversely, our revenue declines when the economy begins to weaken and thus contingent staff positions are eliminated, permanent hiring is frozen and turnover replacement diminishes.

Total company revenue declined to $1.8 billion for the year ended December 27, 2020, a 22.1% decrease compared to the prior year.

The decline was due to a drop in client demand associated with government and societal actions taken to address COVID-19, which had severe adverse impacts on our operations and business results.

Many of our clients have been severely impacted by COVID-19, which has resulted in reduced demand for our services.

However, we saw steady improvement in our year-over-year revenue trends since the second quarter of 2020.

Revenue declined 39.0% in the second quarter, 25.5% in the third quarter and 12.3% in the fourth quarter.

These improvements were broad-based across most of the industries and geographies we serve.

Our PeopleReady and PeopleManagement segments supply contingent workforce solutions to minimize our client’s cost and effort in hiring and managing permanent employees.

This allows for a rapid response to uncertain business conditions through the ability to replace absent employees, fill new positions, and convert fixed or permanent labor costs to variable costs.

Our PeopleScout segment transitions our clients’ internal candidate sourcing and hiring functions to PeopleScout on a permanent or project basis.

Human resource departments are faced with increasingly complex operational and regulatory requirements, increasing candidate expectations, an expanding talent technology landscape, and pressure to achieve efficiencies, which increase the need to migrate non-core functions to outsourced providers like PeopleScout.

PeopleScout can more effectively find and engage high-quality talent, leverage talent acquisition technology, and scale their talent acquisition function to keep pace with changing business needs.

As a result of the factors above, client demand for contingent workforce solutions and outsourced recruiting services are dependent on the overall strength of the economy and labor market, and trends in workforce flexibility.

Total company revenue grew to $2.2 billion for the fiscal year ended December 26, 2021, a 17.7% increase compared to the prior year.

The increase was primarily due to the recovery of client demand for our services, which experienced a significant drop in the prior year due to the negative impact of COVID-19.

This increase was primarily driven by improving volumes from existing clients, including clients in industries that were disproportionately impacted by COVID-19, as well as new client wins.

MANAGEMENT’S DISCUSSION AND ANALYSIS

We report our business as three reportable segments described below and in Note 15:

Segment Information , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K.

PeopleReady revenue declined to $1.1 billion for the year ended December 27, 2020, a 25.4% decrease compared to the prior year.

The decline was due to a drop in client demand associated with government and societal actions taken to address the impact of COVID-19.

In particular, the outbreak and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our operations and business results.

Many of the clients we serve have been severely impacted by COVID-19, which has resulted in reduced demand for our services.

We experienced steady improvements in our year-over-year revenue trends since the second quarter of 2020, which declined 43.4%.

Revenue in the third quarter of 2020 declined 28.9%, and the fourth quarter of 2020 declined 18.5%.

These improvements were broad-based across most geographies and industries, driven primarily by the retail, manufacturing, services and transportation industries.

We believe the year-over-year decline was moderated by the use of our industry-leading JobStack mobile app that digitally connects associates with jobs.

During fiscal 2020, PeopleReady achieved a digital fill rate of 53.0%, compared to 48.0% in the prior year.

As of December 27, 2020, JobStack had more than 26,000 client users, an increase of 23.5% compared to the prior year.

We are focused on driving clients to become JobStack heavy users, which we define as clients with 50 or more touches on JobStack per month.

Heavy client users have consistently posted better year-over-year growth rates compared to other PeopleReady clients.

We more than doubled our heavy client user mix from 11.0% in 2019 to 24.0% in 2020.

Also during 2020, we introduced new digital onboarding features in JobStack that cut application time in half.

This has led to a significant increase in the ratio of associates put to work compared to all applicants.

JobStack is helping us safely connect people with work during this time of crisis.

PeopleReady revenue grew to $1.3 billion for the fiscal year ended December 26, 2021, a 15.6% increase compared to the prior year.

However, as workers began to exit federal and state unemployment programs late in the fiscal third quarter, we saw gradual improvement in the supply of workers through the end of fiscal 2021.

We believe our revenue results have benefited from the use of our industry-leading JobStack TM mobile app that digitally connects associates with jobs.

During fiscal 2021, PeopleReady dispatched approximately 3.4 million shifts via JobStack and achieved a digital fill rate of 58%, an improvement from a 53% fill rate in the prior year.

PeopleManagement

PeopleManagement revenue declined to $586.8 million for the year ended December 27, 2020, an 8.6% decrease compared to the prior year.

Many of the clients we serve have been impacted by COVID-19 and have reduced their need for our services, which has resulted in lower revenue.

PeopleManagement has experienced improving revenue trends during the third and fourth quarters of 2020, compared to the second quarter of 2020, primarily driven by the fact that PeopleManagement supplies an outsourced workforce that involves multi-year, multi-million dollar on-site or driver relationships.

These types of client engagements are often more resilient in an economic downturn.

Year-over-year, revenue declined 22.7% in the second quarter of 2020, declined 7.6% in the third quarter of 2020, and grew 4.6% in the fourth quarter of 2020.

These improvements were broad-based across most of the geographies and industries we serve.

PeopleScout revenue declined to $160.1 million for the year ended December 27, 2020, a 36.6% decrease compared to the prior year.

The revenue decline was primarily due to less demand from existing clients resulting from the economic disruption caused by the impact of COVID-19.

PeopleScout clients in the travel and leisure industries were especially impacted.

These clients, which represented approximately 29% of the client mix for the year ended December 29, 2019, were disproportionately impacted and experienced a 61.0% decrease in revenue compared to prior year.

Year-over-year, revenue declined 52.7% in the second quarter of 2020, 47.6% in the third quarter of 2020, and 23.8% in the fourth quarter of 2020.

PeopleManagement revenue grew to $639.7 million for the fiscal year ended December 26, 2021, a 9.0% increase compared to the prior year.

PeopleManagement growth was due to significant new client wins, which contributed approximately $30 million of revenue for fiscal 2021.

However, the pace of revenue recovery was adversely impacted by worker supply and supply chain related production slowdowns in key industries, such as manufacturing and retail.

PeopleScout revenue grew to $263.0 million for the fiscal year ended December 26, 2021, a 64.3% increase compared to the prior year.

In addition, new client wins contributed approximately $28 million of revenue for fiscal 2021 within a variety of industries including retail, health care and transportation.

Gross profit was as follows:

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Percentage of revenue 25.8 % 23.9 %

Gross profit as a percentage of revenue declined 230 basis points to 23.9% for the year ended December 27, 2020, compared to 26.2% for the prior year.

MANAGEMENT’S DISCUSSION AND ANALYSIS

• Our staffing businesses contributed approximately 140 basis points of the decline due to approximately 100 basis points from pressure on our bill and pay rates caused by higher pay rates to entice associates to take work assignments given COVID-19 health concerns and the availability of additional federal unemployment benefits.

As with prior recessions, our ability to pass through higher costs plus a markup in our bill rates was hampered due to a variety of economic factors negatively impacting our clients’ businesses.

This decline was partially offset by a benefit of 30 basis points from a reduction in estimated costs to comply with the ACA, which were accrued in prior fiscal years.

• Our PeopleScout business contributed approximately 90 basis points to the decline due to client mix and lower volume due to the rapid revenue decline, which outpaced the reductions to our service delivery team, and severance of approximately 20 basis points.

We continue to actively manage workers’ compensation cost by improving the safety of our associates with our safety programs, and actively controlling the cost of health care.

We had favorable adjustments to our prior year workers’ compensation self-insurance reserves of $19.2 million or 1.0% of revenue for the year ended December 27, 2020, compared to $21.7 million, or 0.9% of revenue for the prior year.

Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to lower accident rates and claim costs.

For additional discussion regarding our workers’ compensation liability, see the “Workers’ compensation insurance, collateral and claims reserves” section within Liquidity and Capital Resources.

Gross profit as a percentage of revenue expanded 190 basis points to 25.8% for the fiscal year ended December 26, 2021, compared to 23.9% for the prior year.

Our staffing businesses contributed approximately 90 basis points of expansion, primarily attributable to lower workers’ compensation expense as a result of a reduction to prior year reserves associated with favorable patterns in claim development.

Our PeopleScout business contributed approximately 100 basis points of expansion from improved recruiter utilization on increasing volumes.

Selling, general and administrative expense

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Percentage of revenue 21.4 % 22.1 %

Total company SG&A expense decreased by $108.0 million to $408.3 million, or 22.1% of revenue for the year ended December 27, 2020, compared to $516.2 million, or 21.8% of revenue for the prior year.

These actions reduced SG&A expense by 20.9% for the year ended December 27, 2020, compared to the prior year.

The decrease in SG&A expense benefited from $8.6 million in employee retention subsidies made available under the Canada Emergency Wage Subsidy and Australian JobKeeper subsidy, as well as a U.S.

payroll tax credit in accordance with the provisions of the CARES Act.

As volumes have recovered, variable and discretionary employee compensation levels have risen to reflect improved business performance.

We are better able to leverage our cost structure and run the company more efficiently today than we did prior to the pandemic, with SG&A expense as a percentage of

MANAGEMENT’S DISCUSSION AND ANALYSIS

revenue 40 basis points lower in fiscal 2021 as compared to fiscal 2019.

Depreciation and amortization

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Percentage of revenue 1.3 % 1.7 %

Depreciation and amortization decreased primarily due to the impairment to our acquired client relationships intangible assets of $34.7 million in the first quarter of 2020 and several intangible assets that were fully amortized in the second half of 2019, which resulted in a decline in amortization expense for the year ended December 27, 2020.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Goodwill and intangible asset impairment charge

A summary of the goodwill and intangible asset impairment charge for the year ended December 27, 2020 by reportable segment is as follows:

Depreciation and amortization decreased primarily due to the impairment to our acquired client relationships intangible assets of $34.7 million during the fiscal first quarter of 2020, as discussed below, as well as assets that were fully amortized or depreciated during fiscal 2021.

Goodwill and intangible asset impairment charges

No impairment charge was recorded for the fiscal year ended December 26, 2021.

A summary of the goodwill and intangible asset impairment charges for the fiscal year ended December 27, 2020 by reportable segment are as follows:

(in thousands) PeopleManagement PeopleScout Total company

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Total $ 55,601 $ 119,588 $ 175,189

We experienced a significant decline in our stock price during the first quarter of 2020.

As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets.

The reduced market capitalization reflected the expected continued weakness in pricing and demand for our services in an uncertain economic climate that was further impacted in March 2020 by COVID-19, which created a sudden global economic shock.

Most industries we serve were impacted by a significant decrease in demand for their products and services and, as a result, we experienced a significant drop in client demand associated with government and societal actions taken to address COVID-19.

We experienced significant decreases to our revenue and corresponding operating results due to weakness in pricing and demand for our services during the severe economic downturn.

While demand is expected to recover in the future, the rate of recovery will vary by geography and industry depending on the economic impact caused by COVID-19 and the availability and efficacy of the COVID-19 vaccines.

As a result of our interim impairment test in the first quarter of 2020, we concluded that the carrying amounts of goodwill for PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment charge of $140.5 million.

The total goodwill carrying value of $45.9 million for PeopleManagement On-Site reporting unit was fully impaired.

The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively.

The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $23.6 million and $9.7 million, respectively, as of December 27, 2020.

With the decrease in demand for our services due to the economic impact caused by COVID-19, we lowered our future expectations, which was the primary trigger of an impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million in the first quarter of 2020.

The remaining client relationship intangible asset balances related to assets impaired for PeopleScout RPO and PeopleManagement On-Site were $5.1 million and $7.2 million, respectively, as of December 27, 2020.

As a result of the decrease in demand for our services primarily due to the economic impact caused by COVID-19, we lowered our future expectations, which was the primary trigger of an impairment of our goodwill and acquired client relationships intangible assets recorded during the fiscal year ended December 27, 2020.

As a result of our interim impairment test in the fiscal first quarter of 2020, we concluded that the carrying amounts of goodwill for our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment loss of $140.5 million.

The total goodwill carrying value of $45.9 million for the PeopleManagement On-Site reporting unit was fully impaired.

The goodwill impairment charge for the PeopleScout RPO and PeopleScout MSP reporting units was $92.2 million and $2.4 million, respectively.

The impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units was $34.7 million.

The income tax expense (benefit) and the effective income tax rate were as follows:

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Our effective tax rate for the year ended December 27, 2020 was 18.1% compared to 10.0% for the prior year.

Significant fluctuations in our effective rate are primarily due to the non-deductible goodwill and intangible asset impairment charge, the CARES Act and WOTC.

Other differences between the statutory federal income tax rate result from state and foreign income taxes, certain other non-deductible and non-taxable items, tax exempt interest, and the tax effects of stock-based compensation.

Changes to our effective tax rate are as follows:

Our effective tax rate for the fiscal year ended December 26, 2021 was 16.5% compared to 18.1% for the prior year.

The higher effective tax rate in the prior year was primarily due to the intangible asset impairment charge and the CARES Act.

Other differences between the statutory federal income tax rate result from hiring credits, including WOTC, state and foreign income taxes, certain non-deductible and non-taxable items, and the tax effects of stock-based compensation.

The items creating differences between income taxes computed at the statutory federal income tax rate and income taxes reported on the Consolidated Statements of Operations and Comprehensive Income (Loss) are as follows:

(in thousands, except percentages) 2021 % 2020 %

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State income taxes, net of federal benefit 3,548 4.8 (6,631) 3.8

Job and other tax credits, net (7,719) 4.5 (13,627) (19.4)

Benefit from the CARES Act (2,939) 1.7 — —

Hiring tax credits, net (7,582) (10.3) (7,719) 4.5

CARES Act (468) (0.6) (2,939) 1.7

Non-deductible goodwill impairment charge (1) — — 21,849 (12.6)

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Total tax expense (benefit) $ 12,216 16.5 % $ (31,421) 18.1 %

The non-cash goodwill and intangible asset impairment charge of $175.2 million, recorded in the first quarter of 2020, includes $84.7 million (tax effect of $21.8 million) related to reporting units from stock acquisitions and accordingly are not deductible for tax purposes.

The remaining impairment charge of $90.5 million (tax effect of $23.3 million) is related to reporting units from asset acquisitions and accordingly is deductible for tax purposes.

On March 27, 2020, the CARES Act was enacted in the U.S.

The CARES Act is an emergency economic aid package to help mitigate the impact of COVID-19.

Among other things, the CARES Act provides certain changes to tax laws, including the ability to carry back current year losses to obtain refunds related to prior year tax returns with a higher federal tax rate of 35%.

WOTC is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

(1) The non-deductible goodwill and intangible asset impairment charge relates to an impairment of the carrying amounts of goodwill and other intangible assets of $175.2 million in the fiscal first quarter of 2020.

Of the total goodwill impairment loss, $84.7 million (tax-effect $21.8 million) related to reporting units from stock acquisitions and accordingly were not deductible for tax purposes.

The remaining goodwill and intangible impairment loss of $90.5 million (tax-effect $23.3 million) related to reporting units from asset acquisitions and accordingly were deductible for tax purposes.

WOTC, our primary hiring tax credit, is designed to encourage employers to hire workers from certain targeted groups with higher than average unemployment rates.

WOTC is generally calculated as a percentage of wages over a twelve-month period up to worker maximums by targeted groups.

Based on historical results and business trends, we estimate the amount of WOTC we expect to earn related to wages of the current year.

However, the estimate is subject to variation because 1) a small percentage of our associates qualify for one or more of the many targeted groups;

However, the estimate is subject to variation because 1) a small percentage of our workers qualify for one or more of the many targeted groups;

2) the targeted groups are subject to different incentive credit rates and limitations;

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and 4) state and federal offices can delay their credit certification processing and have inconsistent certification rates.

We adjust prior year hiring credits if it becomes clear that our estimates need revision.

Congress extended the WOTC program through December 31, 2025 as a result of the Consolidated Appropriations Act of 2021.

We recognize an adjustment to prior year hiring credits if credits certified by government offices differ from original estimates.

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

The CARES Act was enacted in the U.S.

on March 27, 2020.

The CARES Act is an emergency economic aid package to help mitigate the impact of COVID-19.

Among other things, the CARES Act provided certain changes to tax laws, including the ability to carry back current year losses to obtain refunds related to prior year tax returns with a higher federal tax rate of 35%.

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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Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest expense, other income and expense, income taxes, and other adjustments not considered to be ongoing.

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, as well as a reconciliation of segment profit to income before tax expense.

Segment profit should not be considered a measure of financial performance in isolation or as an alternative to net income (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.

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Percentage of revenue 6.5 % 3.9 %

PeopleReady segment profit declined $38.9 million for the year ended December 27, 2020, compared to the prior year.

The revenue decline was primarily due to the decrease in client demand associated with government and societal actions taken to address COVID-19.

The decline in demand, as well as increased price sensitivity, increased associate wages, and preventive measures taken to help curb the spread of COVID-19 had severe adverse impacts on our segment profit and our segment profit as a percent of revenue.

The decline in segment profit was partially offset by the decisive and comprehensive cuts to SG&A expense in line with management’s plans to preserve the key strengths of our business.

We believe our revenue decline was partially offset by the use of our industry-leading JobStack mobile app that digitally connects associates with jobs.

JobStack is helping us safely connect people with work during this time of crisis.

PeopleReady segment profit grew $39.2 million for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleReady segment profit and related margin benefited from lower workers’ compensation expense as a result of a reduction to prior year reserves largely associated with favorable patterns in claim development, higher bill rates compared to pay rates, and disciplined cost management.

PeopleManagement segment performance was as follows:

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Percentage of revenue 2.1 % 2.0 %

PeopleManagement segment profit declined $0.9 million for the year ended December 27, 2020, compared to the prior year.

The revenue decline was primarily due to the decrease in demand from our clients associated with government and societal actions taken to address COVID-19.

The decline in demand, as well as increased price sensitivity, higher pay rates necessary to attract employees given the availability of federal unemployment benefits, and preventive measures taken to help curb the spread of COVID-19 had adverse impacts on our segment profit.

The decline in segment profit was partially offset by the decisive and comprehensive cuts to SG&A expense in line with management’s plans to preserve the key strengths of our business.

PeopleManagement segment profit grew $1.5 million for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleManagement segment profit and related margin benefited from higher bill rates compared to pay rates as well as a revenue mix shift to higher margin clients.

PeopleScout segment performance was as follows:

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Percentage of revenue 13.8 % 2.8 %

PeopleScout segment profit declined $33.3 million for the year ended December 27, 2020, compared to the prior year.

The decline in segment profit was primarily due to a decline in demand from our clients associated with government and societal actions taken to address COVID-19.

PeopleScout clients in the travel and leisure industries were especially impacted.

Due to the decline in revenue, we took actions to reduce the cost of our service delivery which lagged the rapid revenue decline caused by the disruption of COVID-19 and negatively impacted our segment profit and our segment profit as a percent of revenue.

The decline in segment profit was partially offset by our cost reduction programs, which have reduced SG&A expense in line with our plans.

PeopleScout segment profit grew $31.6 million for the fiscal year ended December 26, 2021, compared to the prior year.

PeopleScout segment profit and related margin benefited from operating leverage driven by increased utilization of recruiting staff as volumes recovered with existing clients, especially those in industries hit the hardest by COVID-19, such as travel and leisure, as well as new client wins.

FISCAL 2020 AS COMPARED TO FISCAL 2019

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FUTURE OUTLOOK

The global economy and our business have been dramatically affected by COVID-19.

To date, COVID-19 has surfaced all around the world and resulted in country-level quarantines, global travel restrictions and broad-based economic slowdowns.

There are no reliable estimates of how long the pandemic will last, how people will be affected by it, or how rapidly people are vaccinated.

For that reason, it is difficult to predict the short- and long-term impacts of the pandemic on our business at this time.

Due to the uncertainty surrounding COVID-19 and its impact on the business environment, we have limited visibility into our financial condition, results of operations and cash flows in the future.

However, we are providing the following future outlook for fiscal 2021.

Operating outlook

• We anticipate gross margin to decline between 290 and 250 basis points in the first quarter of 2021, compared to the same period in the prior year.

This decline includes a 130 basis point benefit we received in the first quarter of 2020 (30 basis points annualized) from a reduction in estimated health care benefits costs, which was accrued in prior fiscal years.

The remaining decline is primarily due to bill and pay rate pressures.

For fiscal 2021, we anticipate gross margin to decline between 50 and 10 basis points, compared to the same period in the prior year.

This is primarily due to bill and pay rate pressure which we expect to moderate over the course of 2021 and the reduction in estimated health care benefits costs previously mentioned, partially offset by improving PeopleScout volumes.

• In April 2020, we took steps to reduce our operating cost structure and other cash outflows to preserve cash to fund working capital needs.

We expect these actions will have the effect of reducing our operating expenses by $13 million to $17 million in the first quarter of 2021, compared to the same period in the prior year, while preserving the key strengths of our business to ensure we are prepared when business conditions improve.

As the demand environment begins to improve, we will slowly and thoughtfully bring back spending that is critical for the long-term health and sustainability of our business.

• We expect an effective income tax rate for full year 2021, before job tax credits, of 23% to 27%.

We expect job tax credits of $8 million to $10 million.

Our effective tax rate can be more or less volatile based on the amount of pre-tax income.

For example, the impact of tax credits and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

Liquidity outlook

• Capital expenditures for the first quarter of 2021 will be approximately $16 million.

This includes $8 million of build out costs planned for our Chicago support center, of which $6 million will be reimbursed by our landlord and reflected in our operating cash flows.

Capital expenditures for fiscal 2021 are expected to be between $37 million and $41 million.

This includes $10 million of build out costs planned for our Chicago support center, of which $7 million will be reimbursed by our landlord and reflected in our operating cash flows.

The following highlights represent our operating outlook for the fiscal first quarter and full year of fiscal 2022.

These expectations are subject to revision as our business changes with the overall economy.

• We are not providing customary revenue guidance for the fiscal first quarter of 2022.

However, our historical first quarter revenue has averaged about 15% lower than our fourth quarter revenue as the first quarter is historically our quarter with the lowest volume.

• We anticipate gross margin expansion to be between 140 and 180 basis points for the fiscal first quarter of 2022, compared to the same period in prior year, driven by segment revenue mix and higher bill rates compared to pay rates within our contingent staffing businesses.

We anticipate gross margin contraction to be between 70 and 10 basis points for fiscal 2022 compared to fiscal 2021, primarily due to expected increases in workers’ compensation expense due to the reserve reduction experienced in 2021.

• For the fiscal first quarter of 2022, we anticipate SG&A expense to be between $118 million and $122 million.

We will continue to exercise disciplined cost management while making investments in sales resources and digital strategies to drive profitable revenue growth.

We are in the early stages of redesigning our PeopleReady technology platform to better support our digital strategy, which we expect will cost approximately $10 million in fiscal 2022, of which $3 million is expected in the fiscal first quarter.

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

• We expect our capital expenditures and spending for software as a service assets for the fiscal first quarter of 2022 to be approximately $11 million, and to be between $43 million and $48 million for fiscal 2022.

We remain committed to technological innovation to transform our business for a digital future.

We continue to make investments in online and mobile apps to improve access to associates and candidates, as well as improve the speed and ease of connecting our clients and associates for our staffing businesses, and candidates for our RPO business.

We continue to make investments in our online and mobile apps to improve access to associates and candidates, as well as improve the speed and ease of connecting them with our clients.

We expect these investments will increase the competitive differentiation of our services over the long term, improve the efficiency of our service delivery, and reduce PeopleReady’s dependence on local branches to find associates and connect them with work.

Examples include PeopleReady’s JobStack mobile app and PeopleScout’s Affinix talent acquisition technology.

• We expect our Revolving Credit Facility and strong financial position to provide ample liquidity.

At December 27, 2020, we had cash and cash equivalents of $63 million and no outstanding balance drawn on our Revolving Credit Facility, resulting in $161 million available for future borrowings based on our most restrictive covenant.

We have an option to increase the total line of credit amount from $300 million to $450 million, subject to bank approval.

• During fiscal 2020, we generated a cash flow benefit from delayed payroll tax payments under the CARES Act of $57 million.

We plan to take advantage of favorable net operating loss carryback provisions in the CARES Act by repaying this benefit in the third quarter of 2021.

• We had a significant reduction in our accounts receivable balance of $57 million for fiscal 2020 primarily due to lower revenue caused from a decline in demand for our services from COVID-19, as well as a 7% decrease in days sales outstanding due to focused collection efforts.

These efforts resulted in a substantial source of cash in 2020, but will become a cash use as revenue recovers in future periods and we fund increasing accounts receivable.

Examples include PeopleReady’s JobStack mobile app and PeopleScout’s Affinix TM talent acquisition technology.

• We believe the additional government spending on infrastructure projects, as proposed by the current administration, may generate additional demand for industrial staffing businesses during fiscal 2022, especially within the construction, energy and transportation industries.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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Goodwill and intangible asset impairment charge — 175,189

Provision for doubtful accounts 6,300 7,661

Provision for credit losses 6,493 6,300

Stock-based compensation 13,943 9,113

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Other operating activities (1,968) (686)

Changes in operating assets and liabilities, net of amounts divested:

Changes in operating assets and liabilities:

Accounts receivable (81,616) 57,146

Income tax receivable 1,602 (1,122)

Operating lease right-of-use asset 8,080 —

Accounts payable and other accrued expenses 16,425 (6,561)

Accrued wages and benefits 55,053 (9,494)

Other accrued wages and benefits 34,581 (2,012)

Deferred employer payroll taxes (57,065) 57,065

Workers’ compensation claims reserve 701 (125)

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Cash flows from operating activities

Net cash provided by operating activities increased to $152.5 million for the year ended December 27, 2020, compared to $93.5 million for the prior year.

Changes to adjustments to reconcile net income (loss) to net cash provided by operating activities were primarily due to:

• Depreciation and amortization decreased primarily due to the impairment to our acquired client relationships intangible assets for our PeopleScout RPO and PeopleManagement On-Site reporting units of $34.7 million in the first quarter of 2020, and several intangible assets that became fully amortized in 2019.

• Net loss for the year ended December 27, 2020 includes a non-cash goodwill and intangible asset impairment charge of $175.2 million ($151.9 million after tax).

The charge was a result of the adverse impact on expected future cash flows related to the current state of the economy and the impact of COVID-19.

The charge does not impact the company’s current cash, liquidity, or banking covenants.

• Deferred tax assets increased primarily due to $23.3 million of discrete tax benefit resulting from goodwill and intangible asset impairment charges.

Impairment charges related to goodwill and intangible assets acquired in an asset acquisition are deductible for tax purposes.

Changes to operating assets and liabilities were primarily due to:

• Cash provided by accounts receivable of $57.1 million was due to lower revenue from a decline in demand for our services, as well as a 7% decrease in days sales outstanding due to focused collection efforts.

• Cash used for accounts payable and accrued expenses of $6.6 million was primarily due to cost control programs, a decline in customer rebates and timing of payments.

The cost control programs were implemented in response to the economic impact of COVID-19.

Customer rebates have declined significantly due to clients not meeting rebate volume thresholds as a result of the impact of COVID-19 on their businesses.

• Cash provided by accrued wages and benefits of $55.1 million was primarily due to delayed payments for the employer portion of social security taxes incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees, which is allowed under the CARES Act.

We plan to pay the deferred amount by September 15, 2021.

Net cash provided by operating activities decreased to $20.4 million for the fiscal year ended December 26, 2021, compared to $152.5 million for the prior year.

Adjustments to reconcile net income to net cash provided by operating activities for the fiscal year ended December 26, 2021 changed from the prior year primarily due to:

• Decrease in depreciation and amortization due to the impairment to amortizable intangible assets of $34.7 million during the fiscal first quarter of 2020, as well as assets that were fully amortized or depreciated during fiscal 2021.

• Increase in stock-based compensation expense primarily due to performance-based awards tied to company performance, which has improved during the fiscal year ended December 26, 2021.

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

• Decrease in other operating activities primarily related to realized gains upon sale of equity securities held supporting our deferred compensation liability in order to reinvest in company-owned life insurance policies.

Changes to operating assets and liabilities for the fiscal year ended December 26, 2021 and select changes for the fiscal year ended December 27, 2020, contributed in the following ways to net cash provided by operating activities:

• Cash used by accounts receivable of $81.6 million was primarily due to increased revenue driven by the recovery of client demand for our services, as well as an increase in our days sales outstanding of 3.6 days compared to the fiscal year ended December 27, 2020.

The increase in days sales outstanding was primarily due to a higher percentage of receivables with longer payment terms.

Cash provided by accounts receivable of $57.1 million for the fiscal year ended December 27, 2020 was primarily due to lower revenue from a decline in demand for our services, as well as a decrease in days sales outstanding of 3.7 days compared to the fiscal year ended December 29, 2019 due to focused collection efforts.

• Cash provided by operating lease right-of-use asset of $8.1 million represents reimbursable costs we incurred for the build-out of our Chicago support center, that were collected from our landlord during the fiscal year ended December 26, 2021.

There were no similar amounts collected in the prior year.

MANAGEMENT’S DISCUSSION AND ANALYSIS

• Generally, our workers’ compensation claims reserve for estimated claims decreases as contingent labor services decline, as is the case in the current and prior year.

Our worker safety programs have had a positive impact and have created favorable adjustments to our workers’ compensation liabilities recorded in prior periods.

Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to lower accident rates and claim costs.

• Cash provided by accounts payable and other accrued expenses of $16.4 million was primarily due to higher costs required to support revenue growth, timing of these payments, as well as the return of accrued customer rebates as volumes exceeded minimum thresholds.

Cash used for accounts payable and other accrued expenses of $6.6 million for the fiscal year ended December 27, 2020 was primarily due to cost control programs, a decline in accrued customer rebates and timing of payments.

The cost control programs were implemented in response to the economic impact of COVID-19.

Accrued customer rebates declined significantly due to clients not meeting rebate volume thresholds as a result of the impact of COVID-19 on their businesses.

• Cash provided by other accrued wages and benefits of $34.6 million was primarily due to higher accrued wages and benefits consistent with our business recovery as well as timing of payroll tax payments.

• The CARES Act allowed for the deferral of the employer portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our temporary associates and permanent employees.

Cash used by deferred employer payroll taxes of $57.1 million for the fiscal year ended December 26, 2021 was primarily due to the full repayment as of September 15, 2021.

Cash provided by the deferral of employer payroll taxes was $57.1 million for the fiscal year ended December 27, 2020.

Cash flows from investing activities

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Capital expenditures $ (35,006) $ (27,066)

Acquisition of business, net of divestiture of business — 215

Purchases and sales of restricted investments, net 18,786 (7,345)

Net cash used in investing activities $ (16,220) $ (34,411)

Net cash used in investing activities was $34.4 million for the year ended December 27, 2020, compared to $21.6 million for the prior year.

Capital expenditures are primarily due to our continued investment in software technology.

Net cash used in investing activities was $16.2 million for the fiscal year ended December 26, 2021, compared to $34.4 million for the prior year.

Capital expenditures for the fiscal year ended December 26, 2021 include build-out costs for our Chicago support center of $8.6 million, as well as our continued investment in software technology.

We remain committed to technological innovation to transform our business for a digital future that makes it easier for our clients to do business with us and easier to connect people to work.

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Examples include PeopleReady’s JobStack mobile app and PeopleScout’s Affinix talent acquisition technology.

Examples include our JobStack mobile app in our PeopleReady business and our Affinix talent acquisition technology in our PeopleScout business.

Restricted investments consist of collateral that has been provided or pledged to insurance carriers and state workers’ compensation programs, as well as collateral to support the deferred compensation plan.

Lower collateral requirements from our workers’ compensation insurance providers were more than offset by an acceleration of collateral funding required by our primary insurance provider for the year ended December 27, 2020.

Cash provided by net purchases and sales of restricted investments increased $26.1 million during the fiscal year ended December 26, 2021, as compared to the prior year, primarily due to reduced levels of and changes in the timing of collateral contributions as required by our insurance carriers.

Cash flows from financing activities

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Net cash used in financing activities $ (19,126) $ (92,502)

Net cash used in financing activities was $92.5 million for the year ended December 27, 2020, compared to $82.9 million for the prior year.

During the year ended December 27, 2020, we repurchased $40.0 million of our common stock under an accelerated share repurchase program and $12.4 million of our common stock in the open market, including commissions, for a total of $52.4 million, or 9.2% of our common stock under existing authorizations.

These purchases were initiated prior to the medical community’s acknowledgment of the expected severity of the impact of COVID-19.

Net cash used in financing activities of $19.1 million for the fiscal year ended December 26, 2021, was primarily due to the repurchase of $16.7 million of our common stock in the open market under existing authorizations.

As of December 26, 2021, $50.0 million remains available for repurchase under existing authorizations.

We have historically returned capital to shareholders through share repurchases.

Share repurchases are an important part of our capital allocation priorities, however, the second amendment to our credit agreement (the “Second Amendment”) prohibits us from repurchasing shares until July 1, 2021.

Shareholders’ Equity , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our share repurchase program.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Net cash used in financing activities of $92.5 million for the fiscal year ended December 27, 2020, was primarily due to the repurchase of $40.0 million of our common stock under an accelerated share repurchase agreement and $12.4 million of our common stock in the open market for a total of $52.4 million of common stock.

In addition, cash of $37.1 million was used to pay down our Revolving Credit Facility.

FISCAL 2020 AS COMPARED TO FISCAL 2019

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 27, 2020 for discussion of fiscal 2020 compared to fiscal 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS

CAPITAL RESOURCES

Revolving credit facilit y

On March 16, 2020, we entered into a first amendment to our credit agreement with Bank of America, N.A., Wells Fargo Bank, N.A., PNC Bank, N.A., KeyBank, N.A.

and HSBC Bank USA, N.A.

dated as of July 13, 2018, which extended the maturity of the Revolving Credit Facility to March 16, 2025 and modified certain other terms.

On June 24, 2020, we entered into the Second Amendment, which modified terms of our financial covenants as well as certain other provisions of the Revolving Credit Facility.

On January 28, 2021, we entered into a third amendment (the “Third Amendment”), which clarified the definition of the Asset Coverage Ratio financial covenant of the Revolving Credit Facility.

The Third Amendment was effective as of December 27, 2020 (refer to Note 16:

Subsequent Event, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details of the Third Amendment).

Subject to lender approval, we have the ability to increase our Revolving Credit Facility from $300.0 million up to $450.0 million.

Revolving credit facility

Under our Revolving Credit Facility, which matures on March 16, 2025, we have the ability to increase our Revolving Credit Facility from $300.0 million up to $450.0 million, subject to bank approval.

The following financial covenants were in effect starting the fiscal third quarter of 2021 and thereafter:

• Consolidated leverage ratio less than 4.00 for the third and fourth quarter of 2021 and less than 3.00 thereafter, defined as our funded indebtedness divided by trailing twelve months consolidated EBITDA, as defined in the second amendment to our credit agreement.

As of December 26, 2021, our consolidated leverage ratio was 0.05.

• Consolidated fixed charge coverage ratio greater than 1.25, defined as the trailing twelve months bank-adjusted cash flow divided by cash interest expense.

As of December 26, 2021, our consolidated fixed charge coverage ratio was 67.88.

Obligations under the Revolving Credit Facility are guaranteed by TrueBlue and material U.S.

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domestic subsidiaries.

The amended credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including, among others, financial covenants.

The second amendment to our credit agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including the financial covenants listed above.

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.

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The majority of the restricted cash and investments collateralizing our self-insured workers’ compensation policies are held in a trust at the Bank of New York Mellon (“Trust”).

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

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Total collateral commitments $ 208,194 $ 230,621

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

(2) Our surety bonds are issued by independent insurance companies on our behalf and bear annual fees based on a percentage of the bond, which is determined by each independent surety carrier.

These fees do not exceed 2.0% of the bond amount, subject to a minimum charge.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The terms of these bonds are subject to review and renewal every one to four years and most bonds can be canceled by the sureties with as little as 60 days’ notice.

Total collateral commitments decreased $22.4 million during the fiscal year ended December 26, 2021 primarily due to reduced levels of and changes in the timing of collateral contributions as required by our insurance carriers.

At December 26, 2021, we had restricted cash and investments totaling $221.0 million.

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Long-term rating A A2 A

MANAGEMENT’S DISCUSSION AND ANALYSIS

Workers’ compensation reserve

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

Our workers’ compensation claims reserves are discounted to their estimated net present value using discount rates based on returns of “risk-free” U.S.

Our workers’ compensation claims reserve for claims below the deductible limit is discounted to their estimated net present value using discount rates based on returns of “risk-free” U.S.

Treasury instruments with maturities comparable to the weighted average lives of our workers’ compensation claims.

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Treasury instruments available during the year in which the liability was incurred.

At December 27, 2020, the weighted average rate was 1.3%.

The rates used to discount excess claims incurred during the fiscal years ended December 26, 2021 and December 27, 2020 were 1.8% and 1.3%, respectively.

The claim payments are made and the corresponding reimbursements from our insurance carriers are received over an estimated weighted average period of approximately 17 years.

The discounted workers’ compensation reserve for excess claims was $54.0 million and $45.3 million as of December 27, 2020 and December 29, 2019, respectively.

The discounted workers’ compensation reserve for excess claims were $62.7 million and $54.0 million, as of December 26, 2021 and December 27, 2020, respectively.

The discounted receivables from insurance companies, net of valuation allowance, were $61.4 million and $52.9 million as of December 26, 2021 and December 27, 2020, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following table provides an analysis of changes in our workers’ compensation claims reserves:

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(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 in the period when the changes in estimates are made.

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 excess claims are discounted to its estimated net present value using the risk-free rates associated with the actuarially determined weighted average lives of our excess claims.

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We continue to actively manage workers’ compensation cost through the safety of our associates with our safety programs and actively control costs with our network of service providers.

These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in prior periods.

These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the current and prior periods.

Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims.

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FUTURE OUTLOOK

We are focused on cash management as a top priority.

In response to the rapidly changing market conditions due to COVID-19, we have reduced operating costs and other cash outflows to preserve capital to fund working capital needs.

Our Revolving Credit Facility provides for a revolving line of credit of up to $300.0 million with an option, subject to lender approval, to increase the amount to $450.0 million.

On March 16, 2020, we extended the maturity of the Revolving Credit Facility to March 16, 2025.

Although we were in compliance with our covenants, we felt it was prudent to negotiate more favorable covenants given the level of economic uncertainty.

On June 24, 2020, we further amended our revolving credit agreement, which included modifications to our financial covenants.

As of December 27, 2020, we are in a strong financial position with cash and cash equivalents of $62.5 million, no debt outstanding and total liquidity of $160.9 million under the most restrictive covenants of our Revolving Credit Facility.

We expect approximately $16 million of capital expenditures in the first quarter of 2021 and $37 million to $41 million in fiscal 2021.

These capital expenditures include build-out costs for our Chicago support center of approximately $8 million in the first

MANAGEMENT’S DISCUSSION AND ANALYSIS

quarter of 2021 and $10 million in fiscal 2021, of which approximately $6 million and $7 million, respectively, will be reimbursed by our landlord.

These reimbursements will be reflected in our operating cash flows.

The CARES Act included employer payroll tax credits for wages paid to employees who were unable to work during the COVID-19 outbreak.

Under the Act, we were allowed to delay payments for our portion of social security taxes (6.2% of taxable wages) incurred between March 27, 2020 and December 31, 2020, for both our associates and permanent employees.

We anticipate the deferred amount of $57.1 million will be paid by September 15, 2021.

We expect our Revolving Credit Facility and strong financial position to provide ample liquidity.

At December 26, 2021, we had no debt outstanding on our Revolving Credit Facility leaving $294 million unused under the Revolving Credit Facility as $6 million was utilized by outstanding standby letters of credit.

We have an option to increase the total line of credit amount from $300 million to $450 million, subject to bank approval.

As of December 26, 2021, $50 million remains available for repurchase of common stock under existing authorizations.

On January 31, 2022, our Board of Directors authorized a $100 million addition to our share repurchase program for our outstanding common stock.

For further information, see Note 15:

Subsequent Events, to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

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.

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We continue to have risk that these collateral requirements may be increased by our insurers due to our loss history and market dynamics, including from the impact of COVID-19.

We have contractual commitments in the form of operating leases related to office space, vehicles and equipment.

Our leases have remaining terms of up to 16 years.

Commitments and Contingencies , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our operating lease contractual commitments.

We have purchase obligation agreements to purchase goods and services in the ordinary course of business that are enforceable, legally binding and specify all significant terms.

Commitments and Contingencies , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our purchase obligations.

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

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

Commitments and Contingencies and Note 11:

Defined Contribution Plans , to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our contractual obligations.

MANAGEMENT’S DISCUSSION AND ANALYSIS

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

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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.

Considerations related to COVID-19

We have considered COVID-19 related impacts to our estimates, as appropriate, within our financial statements and there may be changes to those estimates in future periods.

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Workers’ compensation reserve

We maintain reserves for workers’ compensation claims, including the excess claims portion above our deductible, using actuarial estimates of the future cost of claims and related expenses.

We maintain reserves for workers’ compensation claims, including the excess claims portion above our insurance deductible, 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 on “risk-free” U.S.

Treasury instruments, which are evaluated on a quarterly basis.

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 in the period when the changes in estimates are made.

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 the reserve and its corresponding receivable to their estimated net present values using the risk-free rates associated

MANAGEMENT’S DISCUSSION AND ANALYSIS

with the actuarially determined weighted average lives of our excess claims.

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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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.

A 5.0% change in one or more of the above factors would result in a change to workers’ compensation cost of approximately $3 million.

For fiscal 2021 claims, a 5% change in one or more of the above factors would result in a change to workers’ compensation cost of approximately $3 million.

Our reserve balances have been positively impacted primarily by the success of our accident prevention programs.

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Invoice amounts are generally higher for PeopleScout than for PeopleManagement On-Site, with similar payment terms.

MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

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Our acquisitions may include contingent consideration, which require 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.

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 for contingent or deferred consideration are classified within cash flows from investing activities for the purchase price fair value of the contingent consideration while amounts paid in excess are classified within cash flows from operating activities on the Consolidated Statements of Cash Flows.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Goodwill and indefinite-lived intangible assets

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We consider our operating segments to be our reporting units for goodwill impairment testing.

As of December 27, 2020, our operating segments were PeopleReady, PeopleManagement Centerline, PeopleManagement On-Site, PeopleScout RPO, and PeopleScout MSP.

Testing for impairment involves comparing the fair value of each reporting unit to its carrying value, including goodwill.

Our operating segments are PeopleReady, PeopleManagement Centerline, PeopleManagement On-Site, PeopleScout RPO and PeopleScout MSP.

The impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill.

Fair value reflects the price a market participant would be willing to pay in a potential sale of the reporting unit.

If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred.

If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value of the goodwill.

Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions to evaluate the impact of operating and macroeconomic changes on each reporting unit.

If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions to evaluate the impact of operational and macroeconomic changes on each reporting unit.

We estimate the fair value of each reporting unit using a weighted average of the income and market valuation approaches.

The income approach applies a fair value methodology based on discounted cash flows.

This analysis requires significant estimates and judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested.

Our weighted average cost of capital for our most recent annual impairment test ranged from 11.0% to 12.0%.

We also apply a market approach, which identifies similar publicly traded companies and develops a correlation, referred to as a multiple, to apply to the operating results of the reporting units.

MANAGEMENT’S DISCUSSION AND ANALYSIS

primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation, and amortization.

The income and market approaches were equally weighted in our most recent annual impairment test.

These combined fair values are reconciled to our aggregate market value of our shares of common stock outstanding on the date of valuation, resulting in a control premium of 23.2% in our most recent annual impairment test.

We base fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

Actual future results may differ from those estimates.

The fair value of each reporting unit is estimated using a combination of a discounted cash flow methodology and the market valuation approach using publicly traded company multiples in similar businesses.

The discounted cash flow methodology required significant judgments, including estimation of future cash flows, which is dependent on internally developed forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows would 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.

The market approach identifies similar publicly traded companies and develops a correlation, referred to as a multiple, to apply to the operating results of the reporting units.

The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation, and amortization.

The income and market approaches are equally weighted.

These combined fair values are reconciled to our aggregate market value of our shares of common stock outstanding on the date of valuation.

We consider a reporting unit’s fair value to be substantially in excess of its carrying value at a 20% premium or greater.

Interim impairment test

During the first quarter of 2020, we experienced a significant decline in our stock price.

As a result of the decline in stock price, our market capitalization fell significantly below the recorded value of our consolidated net assets.

The reduced market capitalization reflected the expected continued weakness in pricing and demand for our staffing services in a volatile economic climate.

This was further impacted in March 2020 by COVID-19, which created a sudden global economic shock.

We experienced a significant drop in client demand associated with government and societal actions taken to address COVID-19.

We expected significant decreases to our revenue and corresponding operating results to continue due to weakness in pricing and demand for our services during this severe economic downturn.

While demand was expected to recover in the future, the rate of recovery was expected to vary by geography and industry depending on the economic impact caused by COVID-19 and the rate at which infections would decline to a contained level.

Accordingly, we performed an interim impairment test of our goodwill on the last day of our fiscal first quarter (March 29, 2020).

The weighted average cost of capital used in our interim impairment test ranged from 11.5% to 12.0%.

Our control premium was approximately 12%, which management has determined to be reasonable.

We carefully considered the economic impact of COVID-19, together with the estimated decreases to our revenue and corresponding operating results as we continued to experience weakness in pricing and demand for our services during the economic downturn.

Our estimates were based on our experience with prior recessions, as well as our experience with plans and actions to adjust and adapt to recessions.

Given the uncertain nature of the economic impact of COVID-19, and the recovery pattern of the broader economy and its impact on our business, actual results could differ significantly from our estimates.

As a result of our interim impairment test, we concluded that the carrying amounts of goodwill for our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units exceeded their implied fair values and we recorded a non-cash impairment charge of $140.5 million, which was included in goodwill and intangible asset impairment charge on the

MANAGEMENT’S DISCUSSION AND ANALYSIS

Consolidated Statements of Operations and Comprehensive Income (Loss).

The goodwill carrying value of $45.9 million for our PeopleManagement On-Site reporting unit was fully impaired.

The goodwill impairment charge for PeopleScout RPO and PeopleScout MSP was $92.2 million and $2.4 million, respectively.

Based on our interim goodwill impairment test, the fair values of our PeopleReady and PeopleManagement Centerline reporting units were substantially in excess of their carrying value at approximately 60% and 195%, respectively.

Annual impairment test

Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual goodwill impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our reporting units was less than the carrying value.

We considered the current and expected future economic and market conditions surrounding COVID-19 and concluded that it was not more likely than not that the goodwill associated with our reporting units were impaired as of the first day of our fiscal second quarter.

Therefore, a quantitative assessment was not performed as of March 30, 2020.

Based on our 2021 annual impairment test performed as of March 29, 2021, all reporting units’ fair values were substantially in excess of their respective carrying values.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 29, 2021 to December 26, 2021.

The remaining goodwill balances for PeopleScout RPO and PeopleScout MSP were $23.6 million and $9.7 million, respectively, as of December 27, 2020.

The loss of a key client, a significant further decline to the economy, or a delayed recovery in key industries we serve, including travel and leisure, could give rise to an additional impairment.

Should any one of these events occur, we would need to record an impairment charge to goodwill for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill.

We will continue to closely monitor the operational performance of our reporting units as it relates to goodwill impairment.

Based on our 2019 and 2018 annual impairment tests, all reporting units’ fair values were substantially in excess of their respective carrying values.

Accordingly, there was no impairment charge recognized for the years ended December 29, 2019 or December 30, 2018.

Accordingly, there was no goodwill impairment charge recorded during fiscal 2021.

During fiscal 2020, we recorded an impairment charge of $140.5 million with respect to our PeopleScout RPO, PeopleScout MSP and PeopleManagement On-Site reporting units.

There was no goodwill impairment charge recorded during fiscal 2019.

Indefinite-lived intangible assets

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We utilize the relief from royalty method to determine the fair value of each of our trade names.

If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value.

If the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value.

Management uses considerable judgment to determine key assumptions, including projected revenue, royalty rates and appropriate discount rates.

Interim impairment test

We performed an interim impairment test as of the last day of our fiscal first quarter for 2020 (March 29, 2020) and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names.

Accordingly, no impairment charge was recognized.

Annual impairment test

Given the proximity of our interim impairment measurement date (last day of our fiscal first quarter - March 29, 2020) to our annual indefinite-lived trade names impairment measurement date (first day of our fiscal second quarter - March 30, 2020), we performed a qualitative assessment to determine whether it was more likely than not that the fair value of any of our indefinite-lived trade names was less than the carrying value.

We concluded that it was not more likely than not that the indefinite-lived intangible assets associated with our Staff Management | SMX and PeopleScout trade names were impaired as of the first day of our fiscal second quarter.

Therefore, a quantitative assessment was not performed as of March 30, 2020.

We performed our annual indefinite-lived intangible asset impairment test as of March 29, 2021, and determined that the estimated fair values exceeded the carrying amounts for our indefinite-lived trade names.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 29, 2021 to December 26, 2021.

Based on our our 2019 and 2018 annual indefinite-lived intangible asset impairment tests, the estimated fair values exceeded their carrying values.

Accordingly, no impairment charge was recognized for the years ended December 29, 2019 or December 30, 2018.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Accordingly, no impairment charge was recorded during fiscal 2021.

No impairment charge was recorded during fiscal 2020 or 2019.

Finite-lived intangible assets and other long-lived assets

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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.

Interim impairment test

With the estimated decrease in demand for our services due to the economic impact of COVID-19, we lowered our future expectations, which was the primary trigger of an impairment test as of the last day of our fiscal first quarter for certain of our acquired client relationships intangible assets.

As a result of this impairment test, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $34.7 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 27, 2020.

The impairment charge for PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets was $25.0 million and $9.7 million, respectively.

Considerable management judgment was necessary to determine key assumptions, including estimated revenue of acquired clients and an appropriate discount rate of 12.0%.

Additionally, we did not identify any events or conditions that make it more likely than not that an impairment may have occurred during the period from March 30, 2020 to December 27, 2020.

Should actual results decline further or longer than we have currently estimated, the remaining intangible asset balances may become further impaired.

We will continue to closely monitor the revenue generated from acquired clients as it relates to client relationship asset impairment.

No impairment charge was recognized for the years ended December 29, 2019 or December 30, 2018.

No impairment charge was recorded during fiscal 2021 or 2019.

During fiscal 2020, we recorded a non-cash impairment charge for our PeopleScout RPO and PeopleManagement On-Site client relationship intangible assets of $34.7 million.

Estimated contingent legal and regulatory liabilities

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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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Income taxes and related valuation allowances

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In determining whether a valuation allowance is appropriate, we consider whether it is more likely than not that all or some portion of our deferred tax assets will not be realized, based in part upon management’s judgments regarding future events and past operating results.

MANAGEMENT’S DISCUSSION AND ANALYSIS

NEW ACCOUNTING STANDARDS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis