TrueBlue, Inc.

Previous wording

TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that help our clients improve productivity and grow their businesses. Client demand for contingent workforce solutions and outsourced recruiting services is cyclical and dependent on the overall strength of the economy and labor market, as well as trends in workforce flexibility. During periods of rising economic uncertainty, clients reduce their contingent labor in response to lower volumes and reduced appetite for expanding production or inventory, which reduces the demand for our services. That environment also reduces demand for permanent placement recruiting, whether outsourced or in-house. However, as the economy emerges from periods of uncertainty, contingent labor providers are uniquely positioned to respond quickly to increasing demand for labor and rapidly fill new or temporary positions, replace absent employees, and convert fixed labor costs to variable costs. Similarly, companies turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover. Our business strategy is focused on growth in each of our business segments by accelerating our digital transformation, expanding in attractive end markets and simplifying our organizational structure, which will enable us to capture market share, deliver more sustainable growth, and enhance our long-term profitability. We have implemented these core strategies for each of our business segments: PeopleReady, PeopleScout and PeopleManagement. For additional discussion on our business and strategy, refer to Business, found in Part I, Item 1 of this Annual Report on Form 10-K.

Current wording

TrueBlue, Inc. (the “company,” “TrueBlue,” “we,” “us” and “our”) is a leading provider of specialized workforce solutions that connect employers and talent. Client demand for contingent workforce solutions and outsourced recruiting services is cyclical and dependent on the overall strength of the economy and labor market, as well as trends in workforce flexibility. During periods of rising economic uncertainty, clients reduce their contingent labor in response to lower volumes and reduced appetite for expanding production or inventory, which reduces the demand for our services. That environment also reduces demand for permanent placement recruiting, whether outsourced or in-house. However, as the economy emerges from periods of uncertainty, contingent labor providers are uniquely positioned to respond quickly to increasing demand for labor and rapidly fill new or temporary positions, replace absent employees, and convert fixed labor costs to variable costs. Similarly, companies turn to hybrid or fully outsourced recruiting models during periods of rapid re-hiring and high employee turnover. Our business strategy is focused on accelerating growth to capture market share, while enhancing our long-term profitability. Key elements of this strategy include enhancing our sales function, expanding in high-growth, less cyclical and under-penetrated end markets as well as high-value roles, and accelerating innovation with technology and operational excellence. For additional discussion on our business and strategy, refer to Business, found in Part I, Item 1 of this Annual Report on Form 10-K.

Previous wording

Total company gross profit as a percentage of revenue for the fiscal year ended December 29, 2024 contracted 60 basis points to 25.9%, compared to the prior year. Changes in revenue mix towards our lower margin staffing businesses and pricing pressures were partially offset by lower workers’ compensation costs and recognition of certain COVID-19 government subsidies.

Current wording

Total company gross profit as a percentage of revenue for the fiscal year ended December 28, 2025 contracted 310 basis points to 22.8%, compared to the prior year. The decline was primarily due to changes in revenue mix toward our lower margin staffing businesses, as well as less favorability in prior year workers’ compensation reserve adjustments.

Previous wording

Total company selling, general and administrative (“SG&A”) expense decreased 16.9% to $410.9 million for the fiscal year ended December 29, 2024, compared to the prior year. SG&A expense decreased as a result of continued operational cost management actions in response to the decline in demand for our services, and simplification of our organizational structure in line with our strategic plan. The additional week in fiscal 2023 contributed $6.6 million of expense.

Current wording

Total company selling, general and administrative (“SG&A”) expense decreased 9.7% to $371.1 million for the fiscal year ended December 28, 2025, compared to the prior year. SG&A expense decreased as a result of continued operational cost management actions in response to the decline in demand for our services, and the simplification of our organizational structure in line with our strategic plan.

Previous wording

The items described above contributed to our net loss of $125.7 million for the fiscal year ended December 29, 2024, compared to net loss of $14.2 million in the prior year.

Current wording

The items described above contributed to our net loss of $48.0 million for the fiscal year ended December 28, 2025, compared to net loss of $125.7 million in the prior year.

Previous wording

As of December 29, 2024, we had cash and cash equivalents of $22.5 million and $118.5 million available under the most restrictive covenant of our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $141.1 million. As of December 29, 2024, $7.6 million was drawn on the Revolving Credit Facility as a Swingline loan.

Current wording

As of December 28, 2025, we had cash and cash equivalents of $24.5 million and outstanding debt of $65.8 million. As of December 28, 2025, $67.6 million was available under the most restrictive covenant of our revolving credit agreement (“Revolving Credit Facility”), for total liquidity of $92.1 million.

Previous wording

Gross profit as a percentage of revenue contracted 60 basis points to 25.9% for the fiscal year ended December 29, 2024, compared to 26.5% for the prior year. Changes in revenue mix resulted in a contraction of 90 basis points, driven in part by revenue shifts toward our lower margin staffing businesses. Our staffing businesses contributed an additional 10 basis points of contraction as a result of pricing pressure typical of a low demand environment. These contractions were partially offset by 20 basis points of expansion from lower workers’ compensation costs driven by favorable development of prior year reserves, as well as 20 basis points of expansion from recognition of certain COVID-19 government subsidies in the current year.

Current wording

Gross profit as a percentage of revenue contracted 310 basis points to 22.8% for the fiscal year ended December 28, 2025, compared to 25.9% for the prior year. Changes in revenue mix resulted in a contraction of 200 basis points, primarily driven by revenue growth in renewable energy clients within our PeopleReady segment, as well as softness in RPO revenue and the acquisition of Healthcare Staffing Professionals, Inc. within our PeopleSolutions segment. Higher workers’ compensation costs, driven by less favorable workers’ compensation reserve adjustments, resulted in an additional 90 basis points of contraction. In addition, depreciation of certain software within PeopleSolutions, reported in cost of services, contributed 20 basis points of contraction.

Previous wording

Total company SG&A expense decreased by $83.7 million or 16.9% for the fiscal year ended December 29, 2024, compared to the prior year. We have continued to execute operational cost management actions in response to the decline in demand for our services, and simplify our organizational structure in line with our strategic plan. SG&A expense in the current year included a benefit, net of related fees, of $6.8 million for recognition of certain COVID-19 government subsidies, offset by $6.4 million of accelerated third-party licensing fees associated with the previous version of our JobStack app. SG&A expense in the prior year included $5.8 million of accelerated compensation costs related to transitions in our executive leadership, as well as an additional week which added $6.6 million of expense.

Current wording

Total company SG&A expense improved by $39.8 million or 9.7% for the fiscal year ended December 28, 2025, compared to the prior year. Operational cost management actions have resulted in a leaner cost structure, which strategically positions us to drive strong profitability as industry demand rebounds. SG&A expense in the current year included a benefit, net of related fees, of $5.4 million for recognition of certain COVID-19 government subsidies, compared to a benefit of $6.8 million included in the prior year. SG&A expense in fiscal year 2024 included $6.4 million of accelerated third-party licensing fees associated with the previous version of our JobStack® app.

Previous wording

We performed an impairment test during our fiscal second quarter of 2024. As a result of this impairment test, we concluded that a trade name/trademark related to our PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.6 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 29, 2024. The charge was primarily driven by recent revenue performance of the related business given a decline in demand and overall economic uncertainty. No further impairment charges were recognized during the fiscal year ended December 29, 2024. The remaining balance for this trade name/trademark was $2.7 million as of December 29, 2024.

Current wording

We performed our annual impairment test as of the first day of our fiscal second quarter of 2025. As a result of this impairment test, we concluded that a trademark related to our PeopleManagement segment exceeded its estimated fair value and we recorded a non-cash impairment charge of $0.2 million, which was included in goodwill and intangible asset impairment charge on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the fiscal year ended December 28, 2025. The charge was primarily driven by an increase in the discount rate. The remaining balance for this trademark was $2.5 million as of December 28, 2025. See Note 6: Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details.

Previous wording

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income or loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, valuation allowances recorded on deferred tax assets, and relative changes in expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items, tax credits, and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower.

Current wording

Our tax provision and our effective tax rate are subject to variation due to several factors, including variability in our pre-tax and taxable income or loss by jurisdiction, tax credits, government audit developments, changes in laws, regulations and administrative practices, valuation allowances recorded on deferred tax assets, and relative changes in expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items, tax credits, non-deductible expenses and valuation allowance on our effective tax rate can be greater when our pre-tax income or loss is lower.

Previous wording

We evaluate segment performance based on segment revenue and segment profit. Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest and other income (expense), income taxes, and other costs and benefits not considered to be ongoing. See Note 15: Segment Information, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our reportable segments, including a reconciliation of segment profit to income (loss) before tax expense (benefit).

Current wording

We evaluate segment performance based on segment revenue and segment profit. Segment profit includes revenue, related cost of services, and ongoing operating expenses directly attributable to the reportable segment. Segment profit excludes goodwill and intangible asset impairment charges, depreciation and amortization expense, unallocated corporate general and administrative expense, interest and other income (expense), income taxes, and other costs and benefits not considered to be ongoing. See Note 15: Segment Information, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our reportable segments, including a reconciliation of segment profit to loss before tax expense (benefit).

Previous wording

PeopleManagement segment profit grew $8.2 million and grew as a percentage of revenue for the fiscal year ended December 29, 2024, compared to the prior year. This growth was primarily due to the decrease in SG&A expense, which was the result of disciplined cost management actions to simplify and streamline our organizational structure to improve efficiency.

Current wording

PeopleManagement segment profit grew $2.7 million and grew as a percentage of revenue for the fiscal year ended December 28, 2025, compared to the prior year. Growth was primarily driven by higher revenue from our commercial driving business, coupled with a reduction in SG&A expense, which was the result of disciplined cost management actions to simplify and streamline our organizational structure to improve efficiency.

Previous wording

•For the fiscal first quarter of 2025, we expect revenue to decline between 13% and 7% as compared to the same period in the prior year. The decline assumes current market conditions continue, and includes approximately 1% headwind due to the sale of Labour Ready Temporary Services, Ltd. (“PeopleReady Canada”) in early 2024, partially offset by approximately 3% inorganic growth from the acquisition of Healthcare Staffing Professionals, Inc. (“HSP”) in late January 2025.

Current wording

•For the fiscal first quarter of 2026, we expect revenue to grow between 3% and 9% as compared to the same period in the prior year. The growth includes approximately 1% growth from the acquisition of Healthcare Staffing Professionals, Inc.

Previous wording

•For the fiscal first quarter of 2025 we anticipate gross profit as a percentage of revenue to decline between 70 and 30 basis points as compared to the same period in the prior year, primarily due to continued changes in business mix.

Current wording

•For the fiscal first quarter of 2026 we anticipate gross profit as a percentage of revenue to decline between 350 and 310 basis points as compared to the same period in the prior year, primarily due to prior year workers’ compensation reserve adjustments not expected to repeat at the same level.

Previous wording

•For the fiscal first quarter of 2025, we anticipate SG&A expense to be between $93 million and $97 million, representing improvement compared to the same period in the prior year, and the result of our ongoing cost management efforts.

Current wording

•For the fiscal first quarter of 2026, we anticipate SG&A expense to be between $86 million and $90 million, representing improvement compared to the same period in the prior year, and the result of our ongoing cost management efforts.

Previous wording

•For fiscal 2025, we expect income tax expense between $2 million and $6 million, which is lower than historical levels due to the valuation allowance against our U.S. federal, state and certain foreign deferred tax assets.

Current wording

•For fiscal 2026, we expect income tax expense between $1 million and $5 million, which is lower than historical levels due to the valuation allowance against our U.S. federal, state and certain foreign deferred tax assets.

Previous wording

•For fiscal 2025, capital expenditures and spending for software as a service assets are expected to be between $19 million and $23 million, with approximately $3 million of this amount relating to spending for software as a service assets.

Current wording

•For fiscal 2026, capital expenditures and capitalized costs associated with the development of software as a service assets are expected to be between $13 million and $17 million, with approximately $1 million of this amount relating to spending for software as a service assets.

Previous wording

We believe we have a strong financial position and sufficient sources of funding to meet our short- and long-term obligations. As of December 29, 2024, we had $22.5 million in cash and cash equivalents and $7.6 million debt outstanding as a Swingline loan under the Revolving Credit Facility. An additional $2.7 million of the Revolving Credit Facility was utilized by outstanding standby letters of credit, leaving $244.7 million unused, of which $118.5 million is available for additional borrowing after considering our most restrictive covenant. We have an option to increase the total line of credit amount under the Revolving Credit Facility from $255.0 million to $405.0 million, subject to lender approval.

Current wording

We believe we have a strong financial position and sufficient sources of funding to meet our short- and long-term obligations. As of December 28, 2025, we had $24.5 million in cash and cash equivalents and $65.8 million debt outstanding. Under the Revolving Credit Facility, an additional $11.4 million was utilized by outstanding standby letters of credit, leaving $177.8 million unused, of which $67.6 million is available for additional borrowing after considering our most restrictive covenant. See Note 8: Long-Term Debt, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for details on our Revolving Credit Facility.

Previous wording

Total collateral commitments decreased $24.5 million during the fiscal year ended December 29, 2024 primarily due to a decrease in collateral levels required by our insurance carriers, as well as the use of collateral to satisfy workers’ compensation claims. See Note 9: Commitments and Contingencies, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our workers’ compensation commitments. We continue to actively manage workers’ compensation costs by focusing on improving our associate safety programs, and actively control costs with our network of service providers. These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the prior periods, as well as lowering our required collateral levels. Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims. Due to our progress in worker safety improvements and the resulting reduction in the frequency and severity of accident rates, we expect diminishing favorable adjustments to our workers’ compensation liabilities going forward.

Current wording

Total collateral commitments decreased $45.5 million during the fiscal year ended December 28, 2025 primarily due to the use of collateral to satisfy workers’ compensation claims, as well as a decrease in collateral levels required by our insurance carriers, consistent with the $43.0 million decrease in workers’ compensation claims reserve. See Note 9: Commitments and Contingencies, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on our workers’ compensation commitments. We continue to actively manage workers’ compensation costs by focusing on improving our associate safety programs and actively control costs with our network of service providers. These actions have had a positive impact creating favorable adjustments to workers’ compensation liabilities recorded in the prior periods, as well as lowering our required collateral levels. Continued favorable adjustments to our prior year workers’ compensation liabilities are dependent on our ability to continue to aggressively lower accident rates and costs of our claims. Due to our progress in worker safety improvements and the resulting reduction in the frequency and severity of accident rates, we expect diminishing favorable adjustments to our workers’ compensation liabilities going forward.

Previous wording

Operating cash flows consist of net income (loss) adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.

Current wording

Operating cash flows consist of net loss adjusted for non-cash benefits and expenses, and changes in operating assets and liabilities.

Previous wording

As client demand declines, the result is a deleveraging of accounts receivable and accounts payable. Accrued wages and benefits can fluctuate based on whether the period end requires the accrual of one or two weeks of payroll, the amount and timing of bonus payments, and timing of payroll tax payments.

Current wording

As client demand improves, the result is generally an increase in accounts receivable and accounts payable. Accrued wages and benefits can fluctuate based on whether the period end requires the accrual of one or two weeks of payroll, the amount and timing of bonus payments and timing of payroll tax payments.

Previous wording

Net cash provided by accounts receivable collections through deleveraging during the fiscal year ended December 29, 2024 was partially offset by an increase in days sales outstanding of approximately three days compared to 2023, primarily due to a shift in business mix towards clients with longer payment terms. Net cash used for payments on accounts payable and other accrued expenses was primarily related to timing of payments to vendors as well as a decrease in certain accrued expenses that fluctuate with revenue. Net cash used for payments on accrued wages and benefits was primarily due to the release of certain COVID-19 government subsidy reserves.

Current wording

Net cash used by accounts receivable during the fiscal year ended December 28, 2025 was primarily due to increased revenue, as well as an increase in days sales outstanding of approximately two days compared to fiscal year ended December 29, 2024, primarily due to a shift in business mix towards clients with longer payment terms. Net cash used for payments on accounts payable and other accrued expenses was primarily related to timing of payments to vendors. In addition, our workers’ compensation claims reserve decreases as claims are paid, and as a result of favorable adjustments of prior year reserves, both of which were the case in the current period.

Previous wording

Investing cash flows consist of capital expenditures, and purchases, sales and maturities of restricted investments, which are managed in line with our workers’ compensation collateral funding requirements and timing of claim payments.

Current wording

Investing cash flows consist of capital expenditures, cash used for business acquisitions, net proceeds from divestitures, and purchases, sales and maturities of restricted investments, which are managed in line with our workers’ compensation collateral funding requirements and timing of claim payments.

Previous wording

Capital expenditures for the fiscal year ended December 29, 2024 included continued investments to upgrade our PeopleReady technology platform. Our capital expenditures were partially offset by cash provided by maturities of restricted investments to pay workers’ compensation claims exceeding purchases of new restricted investments.

Current wording

The primary use of cash for investing activities during the fiscal year ended December 28, 2025 was the acquisition of Healthcare Staffing Professionals, Inc. Capital expenditures included continued investments to upgrade our PeopleReady on-demand technology platform. Cash used was partially offset by cash provided by maturities of restricted investments, which were not reinvested due to lower workers’ compensation collateral requirements.

Previous wording

Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, and the net change in our Revolving Credit Facility.

Current wording

Financing cash flows consist primarily of repurchases of common stock as part of our publicly announced share repurchase program, amounts to satisfy employee tax withholding obligations upon the vesting of restricted stock, the net change in our Revolving Credit Facility, and proceeds from the sale of common stock through our employee stock purchase plan.

Previous wording

Net cash used in financing activities during the fiscal year ended December 29, 2024 was primarily due to use of $21.3 million to repurchase our common stock in the open market. As of December 29, 2024, $33.5 million remains available for repurchase under existing authorization, though we are limited to $25.0 million in aggregate share repurchases in any twelve-month period by our financial covenants. Common stock repurchases were partially offset by a net increase in debt outstanding under our Revolving Credit Facility.

Current wording

Net cash provided by financing activities during the fiscal year ended December 28, 2025 was due to draws on our Revolving Credit Facility, primarily to fund the acquisition of Healthcare Staffing Professionals, Inc. and to finance working capital needs as revenue increased. While we have not executed share repurchases during the fiscal year ended December 28, 2025, $33.5 million remains available for repurchase under existing authorization as of December 28, 2025. We are limited to $25.0 million in aggregate share repurchases in any twelve-month period by our financial covenants.

Previous wording

Management’s discussion and analysis of financial condition and results of operations discusses our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Management’s discussion and analysis of financial condition and results of operations discusses our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

There are two main factors that impact workers’ compensation cost: the number of claims and the cost per claim. The number of claims is driven by the volume of hours worked, the business mix, which reflects the type of work performed, and the safety of the environment where the work is performed. The cost per claim is driven primarily by the severity of the injury, the state in which the injury occurs, related medical costs, and lost-time wage costs. For fiscal 2024 claims, a 5% change in one or more of the above factors would result in a change to workers’ compensation cost of approximately $2 million. Our reserve balances have been positively impacted primarily by the success of our accident prevention programs and our focus on resolving open claims in a timely manner. In the event that we are not able to further reduce our accident rates or resolve open claims in a timely manner, the positive impacts to our reserve balance will diminish.

Current wording

There are two main factors that impact workers’ compensation cost: the number of claims and the cost per claim. The number of claims is driven by the volume of hours worked, the business mix, which reflects the type of work performed, and the safety of the environment where the work is performed. The cost per claim is driven primarily by the severity of the injury, the state in which the injury occurs, related medical costs and lost-time wage costs. For fiscal 2025 claims, a 5% change in one or more of the above factors would result in a change to workers’ compensation cost of approximately $2 million. Our reserve balances have been positively impacted primarily by the success of our accident prevention programs, our focus on resolving open claims in a timely manner, as well as shifts in business mix. In the event that we are not able to further reduce our accident rates or resolve open claims in a timely manner, the positive impacts to our reserve balance will diminish.

Previous wording

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

Current wording

Management evaluates the adequacy of the workers’ compensation reserves in conjunction with an independent quarterly actuarial assessment. Factors considered by management, along with our third-party actuary and third-party administrator, in establishing and adjusting these reserves include, among other things:

Previous wording

•PeopleReady has a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable.

Current wording

•PeopleReady (excluding RenewableWorks) has a large, diverse set of clients, generally with frequent, low dollar invoices due to the daily nature of the work we perform. This results in high turnover in accounts receivable.

Previous wording

•PeopleScout has a smaller number of clients, and generally sends monthly invoices on a consolidated basis for a client. Invoice amounts are generally higher for PeopleScout than our other businesses, with longer payment terms than PeopleReady and Centerline.

Current wording

•Our PeopleScout and HSP brands have a smaller number of clients in a variety of industries and are generally invoiced monthly on a consolidated basis. Invoice amounts are generally higher for these brands than our other businesses, with longer payment terms than PeopleReady and Centerline. These businesses also have significant balances due from governmental entities.

Previous wording

•Staff Management | SMX and SIMOS Insourcing Solutions have a smaller number of clients, and follow a contractual billing schedule. These clients have longer payment terms than our other businesses.

Current wording

•Our Staff Management | SMX and SIMOS Insourcing Solutions brands have a smaller number of clients and follow a contractual billing schedule. These clients generally operate in the manufacturing, warehousing and distribution industries and have longer payment terms than our other businesses.

Previous wording

When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk, current economic data and forecasted information. The allowance for credit loss is reviewed and represents our best estimate of the amount of expected credit losses. Past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the allowance for credit losses are recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Current wording

When specific clients are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The credit loss rates applied to each aging category by pool are based on current collection efforts, historical collection trends, write-off experience, client credit risk and current economic data. Management has elected the practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets. The allowance for credit loss is reviewed and represents our best estimate of the amount of expected credit losses. Past due or delinquent balances are identified based upon a review of aged receivables performed by collections and operations. Past due balances are written off when it is probable the receivable will not be collected. Changes in the allowance for credit losses are recorded in SG&A expense on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Previous wording

We account for our business acquisitions using the acquisition method of accounting. The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determine the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices and estimates made by management. Determining the fair value of an acquired company is judgmental in nature and involves the use of significant estimates and assumptions. The significant judgments include estimation of future cash flows, which is dependent on forecasts; estimation of the long-term rate of growth; estimation of the useful life over which cash flows will occur; and determination of a weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the business being purchased. Intangible assets that arise from contractual/legal rights, or are capable of being separated, are measured and recorded at fair value and amortized over the estimated useful life. If practicable, assets acquired and liabilities assumed arising from contingencies are measured and recorded at fair value. If not practicable, such assets and liabilities are measured and recorded when it is probable that a gain or loss has occurred and the amount can be reasonably estimated. The residual balance of the purchase price, after fair value allocations to all identified assets and liabilities, represents goodwill.

Current wording

We account for our business acquisitions using the acquisition method of accounting. The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Determining the fair value of the assets acquired and liabilities assumed is judgmental in nature and involves the use of significant estimates and assumptions. Estimates are used in accounting for, among other things, the fair value of acquired net operating assets, property and equipment, intangible assets, useful lives of property and equipment, and amortizable lives for acquired intangible assets. Intangible assets that arise from contractual/legal rights, or are capable of being separated, are measured and recorded at fair value and amortized over the estimated useful life. If practicable, assets acquired and liabilities assumed arising from contingencies are measured and recorded at fair value. If not practicable, such assets and liabilities are measured and recorded when it is probable that a gain or loss has occurred and the amount can be reasonably estimated. The residual balance of the purchase price, after fair value allocations to all identified assets and liabilities, represents goodwill.

Previous wording

Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. Acquisition-related costs are expensed as incurred. Our acquisitions may include contingent consideration, which requires us to recognize the fair value of the estimated liability at the time of the acquisition. Subsequent changes in the estimate of the amount to be paid under the contingent consideration arrangement are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss). Cash payments 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. Alternatively, our acquisitions may include contingent payments to employees that are selling shareholders, which are separate from the business combination and are accounted for as compensation expense.

Current wording

Goodwill acquired in business combinations is assigned to the reporting unit(s) expected to benefit from the combination as of the acquisition date. Acquisition-related costs are expensed as incurred. Our acquisitions may include contingent consideration, which requires us to recognize the fair value of the estimated liability at the time of the acquisition. Subsequent changes in the estimate of the amount to be paid under the contingent consideration arrangement are recognized on the Consolidated Statements of Operations and Comprehensive Income (Loss). Cash payments to settle the contingent consideration liability within a relatively short period of time after the acquisition is completed are classified as investing activities in the Consolidated Statements of Cash Flows. Cash payments to settle the contingent consideration liability up to the acquisition date fair value (including measurement period adjustments) that are not within a relatively short period of time are recorded as financing activities in the Consolidated Statements of Cash Flows. Cash payments to settle contingent consideration liability in excess of the acquisition date fair value (including measurement period adjustments) are recorded as operating activities in the Consolidated Statements of Cash Flows. Alternatively, our acquisitions may include contingent payments to employees that are selling shareholders, which are separate from the business combination and are accounted for as compensation expense.

Previous wording

We test for goodwill impairment at the reporting unit level. We consider our operating segments to be our reporting units for goodwill impairment testing. Our reporting units with remaining goodwill as of the first day of our fiscal second quarter of 2024 were PeopleReady, Centerline, PeopleScout RPO and PeopleScout MSP.

Current wording

We test for goodwill impairment at the reporting unit level. We consider our reporting units to be our operating segments or one level below that (the component level) based on our organizational structure. Effective March 31, 2025 (the first day of our fiscal second quarter of 2025), we combined our PeopleScout RPO and PeopleScout MSP reporting units into one reporting unit, PeopleScout. This change coincided with the elimination of PeopleScout MSP as an operating segment within the PeopleSolutions reportable segment. Immediately before the combination, we tested the PeopleScout RPO reporting unit, with a remaining goodwill balance of $22.4 million, and the PeopleScout MSP reporting unit, with a remaining goodwill balance of $0.8 million, for impairment. The PeopleScout RPO reporting unit’s fair value was substantially in excess of its carrying value, and the PeopleScout MSP reporting unit’s fair value approximated its carrying value. After combining the reporting units, the fair value of the PeopleScout reporting unit was substantially in excess of its carrying value. As a result, no impairment charge was recognized. Our reporting units with remaining goodwill as of December 28, 2025 were Centerline, PeopleScout and HSP.

Previous wording

During the fiscal second quarter of 2024, management determined that a triggering event had occurred as a result of additional decline in demand for our services, prolonged economic uncertainty, and a further decrease in our stock price. Therefore, we performed an interim impairment test as of the last day of fiscal May 2024. The weighted average cost of capital used in our most recent impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 13.5% to 14.5%. We also applied a market approach, which develops a value correlation based on the market capitalization of similar publicly traded companies, referred to as a multiple, to apply to the forecasted future operating results of the reporting units. The primary market multiples considered for the market approach are revenue and earnings before interest, taxes, depreciation, and amortization. In our most recent impairment test, the market multiples were based on earnings before interest, taxes, depreciation, and amortization for Centerline and PeopleScout RPO, while market multiples based on revenue were used for PeopleReady. The income and market approaches for each reporting unit were equally weighted in our most recent annual impairment test, except for PeopleScout MSP which relied only on the income approach. The combined fair values for all reporting units were then reconciled to the aggregate market value of our shares of common stock on the date of valuation.

Current wording

We performed our annual impairment test as of the first day of our fiscal second quarter of 2025. The weighted average cost of capital used in our most recent impairment test was risk-adjusted to reflect the specific risk profile of the reporting units and ranged from 14.5% to 16.5%. The combined fair values for all reporting units were then reconciled to the aggregate market value of our shares of common stock on the date of valuation.

Previous wording

Additionally, following performance of the interim impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 29, 2024. See Note 6: Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2024 and 2023 goodwill impairment. There were no goodwill impairment charges recorded during fiscal 2022.

Current wording

Additionally, following performance of the annual impairment test, we did not identify any events or conditions that make it more likely than not that an additional impairment may have occurred during the fiscal year ended December 28, 2025. See Note 6: Goodwill and Intangible Assets, to our consolidated financial statements found in Item 8 of this Annual Report on Form 10-K, for additional details on the 2025, 2024 and 2023 goodwill impairment.

Previous wording

We have indefinite-lived intangible assets for trade names/trademarks related to businesses within our PeopleScout and PeopleManagement segments. We evaluate our indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, or sale or disposition of a significant portion of the business. We monitor the existence of potential impairment indicators throughout the fiscal year.

Current wording

We have indefinite-lived intangible assets for trademarks related to businesses within our PeopleSolutions and PeopleManagement segments. We evaluate our indefinite-lived intangible assets for impairment on an annual basis as of the first day of our fiscal second quarter, or whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, client engagement, or sale or disposition of a significant portion of the business. We monitor the existence of potential impairment indicators throughout the fiscal year.

Previous wording

When evaluating indefinite-lived intangible assets for impairment, we may first assess qualitative factors to determine whether it is more likely than not the fair value of the indefinite-lived intangible is less than its carrying amount. Qualitative factors include macroeconomic conditions, industry and market conditions and overall company financial performance. If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is unnecessary.

Current wording

When evaluating indefinite-lived intangible assets for impairment, we may first assess qualitative factors to determine whether it is more likely than not the fair value of the indefinite-lived intangible asset is less than its carrying amount. Qualitative factors include macroeconomic conditions, industry and market conditions and overall company financial performance. If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is unnecessary.

Previous wording

The quantitative impairment test, if necessary, utilizes the relief from royalty method to determine the fair value of each of our trade names/trademarks. If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including forecasted future revenue, royalty rates and appropriate discount rates.

Current wording

The quantitative impairment test, if necessary, utilizes the relief from royalty method to determine the fair value of each of our trademarks. If the carrying value exceeds the fair value, we recognize an impairment charge in an amount equal to the excess, not to exceed the carrying value. Management uses considerable judgment to determine key assumptions, including forecasted future revenue, royalty rates and appropriate discount rates.