Kelly Reports Second-Quarter 2022 Earnings
- Q2 revenue up 0.7% from a year ago; 2.7% in constant currency
- Q2 operating earnings of
$8.2 million and earnings per share of$0.06 down from a year ago primarily due to a non-cash impairment charge related to our operations inRussia - Adjusted operating earnings of
$22.3 million ; up 63% from a year ago - Completed the acquisition of Pediatric Therapeutic Services in May to extend our leading position in K-12 education
Earnings from operations in the second quarter of 2022 totaled
Earnings per share in the second quarter of 2022 were
"We saw solid demand for Kelly's specialties in the second quarter and, importantly, we are successfully translating revenue into strong gross profit growth. We drove significant improvement in our gross profit rate year over year, due to our continued positive shift in business mix toward higher-margin products and specialties boosted by our specialty acquisitions," said Quigley. "We have significant capital available to enable growth, and we are putting that capital to work to drive shareholder value. While there is some economic uncertainty in the second half of the year, we are confident that our focused and well-capitalized specialization strategy will continue to deliver value in 2022 and beyond."
Kelly also reported that on
In conjunction with its second-quarter earnings release, Kelly has published a financial presentation on the Investor Relations page of its public website and will host a conference call at
Via the Internet:
Kellyservices.com
Via the Telephone
(877) 692-8955 (toll free) or (234) 720-6979 (caller paid)
Enter access code 5728672
After the prompt, please enter "#"
A recording of the conference call will be available after
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, disruption in the labor market and weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers' compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, our ability to successfully develop new service offerings, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, the risk of damage to our brand, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company's filings with the
About Kelly®
KLYA-FIN
MEDIA CONTACT: |
ANALYST CONTACT: |
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(248) 765-6864 |
(248) 244-4586 |
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CONSOLIDATED STATEMENTS OF EARNINGS |
|||||||||||
FOR THE 13 WEEKS ENDED |
|||||||||||
(UNAUDITED) |
|||||||||||
(In millions of dollars except per share data) |
|||||||||||
% |
CC % |
||||||||||
2022 |
2021 |
Change |
Change |
Change |
|||||||
Revenue from services |
$ |
1,267.3 |
$ |
1,258.1 |
$ |
9.2 |
0.7 |
% |
2.7 |
% |
|
Cost of services |
1,004.9 |
1,027.1 |
(22.2) |
(2.2) |
|||||||
Gross profit |
262.4 |
231.0 |
31.4 |
13.6 |
15.6 |
||||||
Selling, general and administrative expenses |
240.1 |
217.3 |
22.8 |
10.6 |
12.3 |
||||||
Impairment of assets held for sale |
18.5 |
— |
18.5 |
NM |
|||||||
Gain on sale of assets |
(4.4) |
— |
(4.4) |
NM |
|||||||
Earnings from operations |
8.2 |
13.7 |
(5.5) |
(40.6) |
|||||||
Gain on investment in Persol Holdings |
— |
6.3 |
(6.3) |
NM |
|||||||
Other expense, net |
(1.1) |
(0.3) |
(0.8) |
(350.6) |
|||||||
Earnings before taxes and equity in net earnings (loss) of affiliate |
7.1 |
19.7 |
(12.6) |
(64.1) |
|||||||
Income tax expense (benefit) |
4.9 |
(2.6) |
7.5 |
282.9 |
|||||||
Net earnings before equity in net earnings (loss) of affiliate |
2.2 |
22.3 |
(20.1) |
(90.1) |
|||||||
Equity in net earnings (loss) of affiliate |
— |
1.7 |
(1.7) |
NM |
|||||||
Net earnings |
$ |
2.2 |
$ |
24.0 |
$ |
(21.8) |
(90.8) |
||||
Basic earnings per share |
$ |
0.06 |
$ |
0.60 |
$ |
(0.54) |
(90.0) |
||||
Diluted earnings per share |
$ |
0.06 |
$ |
0.60 |
$ |
(0.54) |
(90.0) |
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STATISTICS: |
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Permanent placement revenue (included in revenue from services) |
$ |
24.8 |
$ |
18.6 |
$ |
6.2 |
33.2 |
% |
36.3 |
% |
|
Gross profit rate |
20.7 |
% |
18.4 |
% |
2.3 |
pts. |
|||||
Conversion rate |
3.1 |
% |
5.9 |
% |
(2.8) |
pts. |
|||||
Adjusted EBITDA |
$ |
31.7 |
$ |
22.2 |
$ |
9.5 |
|||||
Adjusted EBITDA margin |
2.5 |
% |
1.8 |
% |
0.7 |
pts. |
|||||
Effective income tax rate |
68.8 |
% |
(13.5) |
% |
82.3 |
pts. |
|||||
Average number of shares outstanding (millions): |
|||||||||||
Basic |
37.9 |
39.4 |
|||||||||
Diluted |
38.2 |
39.5 |
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CONSOLIDATED STATEMENTS OF EARNINGS |
|||||||||||
FOR THE 26 WEEKS ENDED |
|||||||||||
(UNAUDITED) |
|||||||||||
(In millions of dollars except per share data) |
|||||||||||
% |
CC % |
||||||||||
2022 |
2021 |
Change |
Change |
Change |
|||||||
Revenue from services |
$ |
2,563.7 |
$ |
2,464.0 |
$ |
99.7 |
4.0 |
% |
5.8 |
% |
|
Cost of services |
2,042.7 |
2,019.7 |
23.0 |
1.1 |
|||||||
Gross profit |
521.0 |
444.3 |
76.7 |
17.3 |
19.0 |
||||||
Selling, general and administrative expenses |
476.2 |
420.0 |
56.2 |
13.4 |
14.8 |
||||||
Impairment of assets held for sale |
18.5 |
— |
18.5 |
NM |
|||||||
Gain on sale of assets |
(5.3) |
— |
(5.3) |
NM |
|||||||
Earnings from operations |
31.6 |
24.3 |
7.3 |
29.8 |
|||||||
Gain (loss) on investment in Persol Holdings |
(67.2) |
36.3 |
(103.5) |
NM |
|||||||
Loss on currency translation from liquidation of subsidiary(1) |
(20.4) |
— |
(20.4) |
NM |
|||||||
Other income (expense), net |
1.7 |
(3.7) |
5.4 |
147.2 |
|||||||
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate |
(54.3) |
56.9 |
(111.2) |
NM |
|||||||
Income tax expense (benefit) |
(8.1) |
7.9 |
(16.0) |
(204.0) |
|||||||
Net earnings (loss) before equity in net earnings (loss) of affiliate |
(46.2) |
49.0 |
(95.2) |
NM |
|||||||
Equity in net earnings (loss) of affiliate |
0.8 |
0.6 |
0.2 |
35.7 |
|||||||
Net earnings (loss) |
$ |
(45.4) |
$ |
49.6 |
$ |
(95.0) |
NM |
||||
Basic earnings (loss) per share |
$ |
(1.19) |
$ |
1.25 |
$ |
(2.44) |
NM |
||||
Diluted earnings (loss) per share |
$ |
(1.19) |
$ |
1.25 |
$ |
(2.44) |
NM |
||||
STATISTICS: |
|||||||||||
Permanent placement revenue (included in revenue from services) |
$ |
51.4 |
$ |
34.6 |
$ |
16.8 |
48.5 |
% |
51.4 |
% |
|
Gross profit rate |
20.3 |
% |
18.0 |
% |
2.3 |
pts. |
|||||
Conversion rate |
6.1 |
% |
5.5 |
% |
0.6 |
pts. |
|||||
Adjusted EBITDA |
$ |
62.4 |
$ |
39.1 |
$ |
23.3 |
|||||
Adjusted EBITDA margin |
2.4 |
% |
1.6 |
% |
0.8 |
pts. |
|||||
Effective income tax rate |
15.0 |
% |
13.8 |
% |
1.2 |
pts. |
|||||
Average number of shares outstanding (millions): |
|||||||||||
Basic |
38.3 |
39.4 |
|||||||||
Diluted |
38.3 |
39.5 |
(1) |
Subsequent to the sale of the Persol Holdings investment, the Company commenced the dissolution process of the Kelly Services Japan subsidiary, which was considered substantially liquidated as of the first quarter-end 2022, resulting in the recognition of the |
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RESULTS OF OPERATIONS BY SEGMENT |
||||||||||
(UNAUDITED) |
||||||||||
(In millions of dollars) |
||||||||||
Second Quarter |
||||||||||
% |
CC % |
|||||||||
2022 |
2021 |
Change |
Change |
|||||||
Professional & Industrial |
||||||||||
Revenue from services |
$ |
415.8 |
$ |
466.5 |
(10.9) |
% |
(10.6) |
% |
||
Gross profit |
77.8 |
75.2 |
3.6 |
3.9 |
||||||
Total SG&A expenses |
67.4 |
69.0 |
(2.2) |
(2.0) |
||||||
Earnings (loss) from operations |
10.4 |
6.2 |
68.6 |
|||||||
Gross profit rate |
18.7 |
% |
16.1 |
% |
2.6 |
pts. |
||||
Science, Engineering & Technology |
||||||||||
Revenue from services |
$ |
324.3 |
$ |
298.2 |
8.7 |
% |
9.0 |
% |
||
Gross profit |
75.2 |
66.5 |
13.1 |
13.3 |
||||||
Total SG&A expenses |
54.8 |
46.9 |
16.9 |
17.1 |
||||||
Earnings (loss) from operations |
20.4 |
19.6 |
3.8 |
|||||||
Gross profit rate |
23.2 |
% |
22.3 |
% |
0.9 |
pts. |
||||
Education |
||||||||||
Revenue from services |
$ |
155.5 |
$ |
105.9 |
46.8 |
% |
46.8 |
% |
||
Gross profit |
26.0 |
16.8 |
55.0 |
55.0 |
||||||
Total SG&A expenses |
20.4 |
15.3 |
33.4 |
33.4 |
||||||
Earnings (loss) from operations |
5.6 |
1.5 |
278.6 |
|||||||
Gross profit rate |
16.7 |
% |
15.8 |
% |
0.9 |
pts. |
||||
Outsourcing & Consulting |
||||||||||
Revenue from services |
$ |
124.4 |
$ |
107.3 |
16.0 |
% |
17.3 |
% |
||
Gross profit |
46.2 |
34.8 |
32.8 |
35.3 |
||||||
Total SG&A expenses |
39.8 |
30.1 |
32.5 |
34.5 |
||||||
Earnings (loss) from operations |
6.4 |
4.7 |
34.5 |
|||||||
Gross profit rate |
37.2 |
% |
32.5 |
% |
4.7 |
pts. |
||||
International |
||||||||||
Revenue from services |
$ |
247.6 |
$ |
280.4 |
(11.7) |
% |
(4.3) |
% |
||
Gross profit |
37.2 |
37.7 |
(1.5) |
7.3 |
||||||
Total SG&A expenses |
34.6 |
34.6 |
(0.1) |
8.2 |
||||||
Earnings (loss) from operations |
2.6 |
3.1 |
(16.3) |
|||||||
Gross profit rate |
15.0 |
% |
13.4 |
% |
1.6 |
pts. |
|
||||||||||
RESULTS OF OPERATIONS BY SEGMENT |
||||||||||
(UNAUDITED) |
||||||||||
(In millions of dollars) |
||||||||||
June Year to Date |
||||||||||
% |
CC % |
|||||||||
2022 |
2021 |
Change |
Change |
|||||||
Professional & Industrial |
||||||||||
Revenue from services |
$ |
860.1 |
$ |
934.1 |
(7.9) |
% |
(7.8) |
% |
||
Gross profit |
160.9 |
151.1 |
6.5 |
6.7 |
||||||
Total SG&A expenses |
138.8 |
138.4 |
0.3 |
0.4 |
||||||
Earnings (loss) from operations |
22.1 |
12.7 |
74.2 |
|||||||
Gross profit rate |
18.7 |
% |
16.2 |
% |
2.5 |
pts. |
||||
Science, Engineering & Technology |
||||||||||
Revenue from services |
$ |
641.4 |
$ |
552.9 |
16.0 |
% |
16.2 |
% |
||
Gross profit |
149.0 |
119.7 |
24.5 |
24.7 |
||||||
Total SG&A expenses |
108.0 |
82.6 |
30.8 |
30.9 |
||||||
Earnings (loss) from operations |
41.0 |
37.1 |
10.5 |
|||||||
Gross profit rate |
23.2 |
% |
21.6 |
% |
1.6 |
pts. |
||||
Education |
||||||||||
Revenue from services |
$ |
328.9 |
$ |
217.5 |
51.2 |
% |
51.2 |
% |
||
Gross profit |
52.6 |
34.0 |
54.9 |
54.9 |
||||||
Total SG&A expenses |
39.0 |
29.5 |
32.4 |
32.4 |
||||||
Earnings (loss) from operations |
13.6 |
4.5 |
203.1 |
|||||||
Gross profit rate |
16.0 |
% |
15.6 |
% |
0.4 |
pts. |
||||
Outsourcing & Consulting |
||||||||||
Revenue from services |
$ |
233.5 |
$ |
206.6 |
13.0 |
% |
14.1 |
% |
||
Gross profit |
83.5 |
66.1 |
26.3 |
28.2 |
||||||
Total SG&A expenses |
74.1 |
58.5 |
26.7 |
28.2 |
||||||
Earnings (loss) from operations |
9.4 |
7.6 |
23.1 |
|||||||
Gross profit rate |
35.8 |
% |
32.0 |
% |
3.8 |
pts. |
||||
International |
||||||||||
Revenue from services |
$ |
500.4 |
$ |
553.3 |
(9.5) |
% |
(2.7) |
% |
||
Gross profit |
75.0 |
73.4 |
2.1 |
10.0 |
||||||
Total SG&A expenses |
67.8 |
67.7 |
0.2 |
7.4 |
||||||
Earnings (loss) from operations |
7.2 |
5.7 |
25.7 |
|||||||
Gross profit rate |
15.0 |
% |
13.3 |
% |
1.7 |
pts. |
|
|||||||
CONSOLIDATED BALANCE SHEETS |
|||||||
(UNAUDITED) |
|||||||
(In millions of dollars) |
|||||||
|
|
|
|||||
Current Assets |
|||||||
Cash and equivalents |
$ |
133.9 |
$ |
112.7 |
$ |
64.4 |
|
Trade accounts receivable, less allowances of |
|||||||
|
1,497.9 |
1,423.2 |
1,362.5 |
||||
Prepaid expenses and other current assets |
80.6 |
52.8 |
82.4 |
||||
Assets held for sale |
24.6 |
— |
— |
||||
Total current assets |
1,737.0 |
1,588.7 |
1,509.3 |
||||
Noncurrent Assets |
|||||||
Property and equipment, net |
25.4 |
35.3 |
37.7 |
||||
Operating lease right-of-use assets |
70.1 |
75.8 |
83.2 |
||||
Deferred taxes |
298.3 |
302.8 |
302.9 |
||||
|
192.1 |
114.8 |
114.8 |
||||
Investment in Persol Holdings |
— |
264.3 |
187.7 |
||||
Investment in equity affiliate |
— |
123.4 |
120.0 |
||||
Other assets |
412.3 |
389.1 |
391.3 |
||||
Total noncurrent assets |
998.2 |
1,305.5 |
1,237.6 |
||||
Total Assets |
$ |
2,735.2 |
$ |
2,894.2 |
$ |
2,746.9 |
|
Current Liabilities |
|||||||
Short-term borrowings |
$ |
— |
$ |
— |
$ |
0.1 |
|
Accounts payable and accrued liabilities |
734.7 |
687.2 |
612.6 |
||||
Operating lease liabilities |
15.3 |
17.5 |
19.6 |
||||
Accrued payroll and related taxes |
322.4 |
318.4 |
337.0 |
||||
Accrued workers' compensation and other claims |
24.4 |
20.8 |
22.0 |
||||
Income and other taxes |
50.5 |
51.3 |
62.6 |
||||
Liabilities held for sale |
13.7 |
— |
— |
||||
Total current liabilities |
1,161.0 |
1,095.2 |
1,053.9 |
||||
Noncurrent Liabilities |
|||||||
Operating lease liabilities |
57.7 |
61.4 |
67.1 |
||||
Accrued payroll and related taxes |
— |
57.6 |
58.5 |
||||
Accrued workers' compensation and other claims |
43.4 |
37.0 |
40.8 |
||||
Accrued retirement benefits |
180.2 |
220.0 |
214.6 |
||||
Other long-term liabilities |
16.0 |
86.8 |
68.2 |
||||
Total noncurrent liabilities |
297.3 |
462.8 |
449.2 |
||||
Stockholders' Equity |
|||||||
Common stock |
38.5 |
40.1 |
40.1 |
||||
|
(12.5) |
(15.1) |
(15.3) |
||||
Paid-in capital |
24.9 |
23.9 |
22.3 |
||||
Earnings invested in the business |
1,239.2 |
1,315.0 |
1,212.5 |
||||
Accumulated other comprehensive income (loss) |
(13.2) |
(27.7) |
(15.8) |
||||
Total stockholders' equity |
1,276.9 |
1,336.2 |
1,243.8 |
||||
Total Liabilities and Stockholders' Equity |
$ |
2,735.2 |
$ |
2,894.2 |
$ |
2,746.9 |
|
STATISTICS: |
|||||||
Working Capital |
$ |
576.0 |
$ |
493.5 |
$ |
455.4 |
|
Current Ratio |
1.5 |
1.5 |
1.4 |
||||
Debt-to-capital % |
0.0 |
% |
0.0 |
% |
0.0 |
% |
|
Global Days Sales Outstanding |
63 |
60 |
60 |
||||
Year-to-Date Free Cash Flow |
$ |
(110.8) |
$ |
73.8 |
$ |
42.7 |
|
||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
FOR THE 26 WEEKS ENDED |
||||
(UNAUDITED) |
||||
(In millions of dollars) |
||||
2022 |
2021 |
|||
Cash flows from operating activities: |
||||
Net earnings (loss) |
$ |
(45.4) |
$ |
49.6 |
Adjustments to reconcile net earnings (loss) to net cash from operating activities: |
||||
Impairment of assets held for sale |
18.5 |
— |
||
Depreciation and amortization |
16.1 |
14.1 |
||
Operating lease asset amortization |
9.8 |
10.7 |
||
Provision for credit losses and sales allowances |
1.3 |
— |
||
Stock-based compensation |
3.8 |
2.8 |
||
(Gain) loss on investment in Persol Holdings |
67.2 |
(36.3) |
||
Loss on currency translation from liquidation of subsidiary |
20.4 |
— |
||
Gain on foreign currency remeasurement |
(5.5) |
— |
||
Gain on sale of assets |
(5.3) |
— |
||
Equity in net (earnings) loss of |
(0.8) |
(0.6) |
||
Other, net |
2.9 |
2.2 |
||
Changes in operating assets and liabilities, net of acquisitions |
(190.3) |
5.1 |
||
Net cash (used in) from operating activities |
(107.3) |
47.6 |
||
Cash flows from investing activities: |
||||
Capital expenditures |
(3.5) |
(4.9) |
||
Proceeds from sale of assets |
4.5 |
— |
||
Acquisition of companies, net of cash received |
(143.1) |
(219.0) |
||
Proceeds from company-owned life insurance |
1.5 |
10.4 |
||
Proceeds from sale of Persol Holdings investment |
196.9 |
— |
||
Proceeds from sale of equity method investment |
119.5 |
— |
||
Proceeds related to loans with equity affiliate |
— |
5.8 |
||
Proceeds from equity securities |
— |
5.0 |
||
Other investing activities |
(0.2) |
1.0 |
||
Net cash from (used in) investing activities |
175.6 |
(201.7) |
||
Cash flows from financing activities: |
||||
Net change in short-term borrowings |
— |
(0.1) |
||
Financing lease payments |
(0.4) |
(0.3) |
||
Dividend payments |
(4.8) |
— |
||
Payments of tax withholding for stock awards |
(0.8) |
(0.6) |
||
Buyback of common shares |
(27.2) |
— |
||
Contingent consideration payments |
(0.7) |
— |
||
Net cash used in financing activities |
(33.9) |
(1.0) |
||
Effect of exchange rates on cash, cash equivalents and restricted cash |
0.1 |
(2.3) |
||
Net change in cash, cash equivalents and restricted cash |
34.5 |
(157.4) |
||
Cash, cash equivalents and restricted cash at beginning of period |
119.5 |
228.1 |
||
Cash, cash equivalents and restricted cash at end of period |
$ |
154.0 |
$ |
70.7 |
|
|||||||||
REVENUE FROM SERVICES BY GEOGRAPHY |
|||||||||
(UNAUDITED) |
|||||||||
(In millions of dollars) |
|||||||||
Second Quarter |
|||||||||
% |
CC % |
||||||||
2022 |
2021 |
Change |
Change |
||||||
|
|||||||||
|
$ |
928.9 |
$ |
894.6 |
3.8 |
% |
3.8 |
% |
|
|
40.3 |
39.5 |
1.8 |
6.0 |
|||||
|
28.9 |
26.9 |
7.7 |
7.7 |
|||||
|
11.2 |
33.1 |
(66.3) |
(66.2) |
|||||
|
1,009.3 |
994.1 |
1.5 |
1.7 |
|||||