Kelly Reports Fourth-Quarter and Full-Year 2022 Earnings

February 16, 2023
  • Q4 revenue down 1.3%; up 0.7% in constant currency
  • Q4 gross profit up 1.7%; up 3.7% in constant currency with Q4 GP rate of 20.3%, an improvement of 60 bps
  • Q4 operating earnings of $4.6 million including non-cash goodwill impairment charge, or $14.0 million on an adjusted basis, down 28% on an adjusted basis from a year ago
  • Full year 2022 operating earnings of $14.8 million, or adjusted earnings of $68.3 million, compared to adjusted earnings of $52.6 million last year, up 30% on an adjusted basis

TROY, Mich., Feb. 16, 2023 /PRNewswire/ -- Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the fourth quarter and full year of 2022.

Peter Quigley, president and chief executive officer, announced revenue for the fourth quarter of 2022 totaled $1.2 billion, a 1.3% decrease, or 0.7% increase in constant currency, compared to the corresponding quarter of 2021. Year-over-year revenue trends were impacted by foreign currency headwinds and the impact of the sale of our Russian operations in July 2022. Year-over-year results in the quarter also reflect the impact of the recent acquisitions of RocketPower, a recruitment process outsourcing firm, and Pediatric Therapeutic Services, a specialty firm providing in-school therapy services.

Kelly reported operating earnings in the fourth quarter of 2022 of $4.6 million, compared to earnings of $15.3 million reported in the fourth quarter of 2021. Earnings in the fourth quarter of 2022 included a $10.3 million goodwill impairment charge related to RocketPower. The charge reflects the acceleration of declines in hiring in the high-tech industry in which RocketPower specializes. Excluding the impairment charge and a $0.9 million gain related to the sale of real property, adjusted earnings from operations were $14.0 million. Earnings in the fourth quarter of 2021 included a $4.1 million restructuring charge and adjusted earnings were $19.4 million. Adjusted earnings declined primarily as a result of higher selling, general and administrative expenses, partially offset by the impact of structural improvements in the business mix which resulted in higher gross profit.

Loss per share in the fourth quarter of 2022 was $0.02 compared to earnings per share of $1.80 in the fourth quarter of 2021. Included in the loss per share in the fourth quarter of 2022 is a $0.23 per share goodwill impairment charge, net of tax, related to RocketPower, partially offset by a $0.02 per share gain on sale of real property, net of tax. Included in the fourth quarter of 2021 is a non-cash gain, net of tax, on Kelly's investment in Persol Holdings common shares of $0.87 and a gain on insurance settlement, net of tax, of $0.36, partially offset by a loss of $0.08 related to restructuring charges, net of tax. On an adjusted basis, earnings per share were $0.18 in the fourth quarter of 2022, a decline from $0.65 per share in the corresponding quarter of 2021.

Operating earnings for the full year of 2022 totaled $14.8 million compared to earnings of $48.6 million for the full year of 2021. The 2022 full-year results included a $41.0 million goodwill impairment charge, an $18.7 million loss on the disposal of Kelly's Russian operations and $6.2 million of gains on the sale of assets. The 2021 full-year results included a $4.0 million restructuring charge. On an adjusted basis, earnings from operations for the full year of 2022 were $68.3 million compared to $52.6 million for the full year of 2021, a 30% improvement.

The loss per share for the full year of 2022 was $1.64 compared to earnings per share for the full year of 2021 of $3.91. Included in the loss per share for the full year of 2022 is a $1.28 loss on Kelly's investment in Persol Holdings common stock, net of tax, an $0.89 goodwill impairment charge, net of tax, a $0.49 loss on sale of Kelly's Russian operations, net of tax, and a $0.43 loss on foreign currency matters, net of tax, partially offset by a $0.12 gain on sale of assets, net of tax. Included in the earnings per share for the full year of 2021 was $2.12 from a non-cash gain on Kelly's investment in Persol Holdings common stock, net of tax, and a $0.36 gain on insurance settlement, net of tax, partially offset by a $0.07 per share restructuring charge, net of tax. On an adjusted basis, earnings per share were $1.33 for the full year of 2022 compared to $1.51 for the full year of 2021.

"As macroeconomic uncertainty increased in the fourth quarter, we remained focused on executing our specialty strategy, achieving top-line growth in our Education, SET, and OCG segments, and expanding our gross profit rate on a year-over-year basis as we continue to remix our portfolio toward higher-margin, higher-value products and specialties," said Quigley. "While it's difficult to know how the macroeconomic situation will unfold as we move forward in 2023, we will position Kelly to manage through this economic cycle while staying the course in our aggressive pursuit of profitable growth. With ample capital available to us, we will continue to execute our inorganic strategy and invest in technologies and new products that will improve the talent and customer experience, increase efficiency, and enable organic growth well into the future."

Kelly also reported that on February 14, its board of directors declared a dividend of $0.075 per share. The dividend is payable on March 13, 2023 to stockholders of record as of the close of business on February 27, 2023.

In conjunction with its fourth-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 9 a.m. ET on February 16 to review the results and answer questions. The call may be accessed in one of the following ways:

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 2:30 p.m. ET on February 16, 2023, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 1472042#. The recording will also be available at kellyservices.com during this period.

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 brands, 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, exposure to risks associated with certain equity investments, including with strategic partners, 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 Securities and Exchange Commission. Actual results may differ materially from any forward-looking statements contained herein, and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

About Kelly®

Kelly Services, Inc. (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, Light Industrial, and more. We're always thinking about what's next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 300,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2022 was $5.0 billion. Visit kellyservices.com and let us help with what's next for you.

KLYA-FIN

MEDIA CONTACT:



ANALYST CONTACT:

Jane Stehney



James Polehna

(248) 765-6864



(248) 244-4586

stehnja@kellyservices.com



polehjm@kellyservices.com

 

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 13 WEEKS ENDED JANUARY 1, 2023 AND JANUARY 2, 2022

(UNAUDITED)

(In millions of dollars except per share data)









%


CC %




2022


2021


Change


Change


Change














Revenue from services

$

1,233.8

$

1,250.3

$

(16.5)


(1.3)

%

0.7

%













Cost of services


983.6


1,004.3


(20.7)


(2.1)
















Gross profit


250.2


246.0


4.2


1.7


3.7














Selling, general and administrative expenses


236.2


230.7


5.5


2.4


4.0














Goodwill impairment charge


10.3



10.3


NM
















Gain on sale of assets


(0.9)



(0.9)


NM
















Earnings from operations


4.6


15.3


(10.7)


(70.2)
















Gain (loss) on investment in Persol Holdings



50.0


(50.0)


NM
















Gain on insurance settlement



19.0


(19.0)


NM
















Other income (expense), net


(0.3)


0.4


(0.7)


(161.1)
















Earnings before taxes and equity in net earnings (loss) of affiliate


4.3


84.7


(80.4)


(94.9)
















Income tax expense (benefit)


5.2


16.1


(10.9)


(67.7)
















Net earnings (loss) before equity in net earnings (loss) of affiliate


(0.9)


68.6


(69.5)


NM
















Equity in net earnings (loss) of affiliate



3.1


(3.1)


NM
















Net earnings

$

(0.9)

$

71.7

$

(72.6)


NM

%















Basic earnings (loss) per share

$

(0.02)

$

1.80

$

(1.82)


NM

%



Diluted earnings (loss) per share

$

(0.02)

$

1.80

$

(1.82)


NM

%















STATISTICS:
























Permanent placement income (included in revenue from services)

$

18.4

$

21.1

$

(2.7)


(12.7)

%

(10.0)

%













Gross profit rate


20.3

%

19.7

%

0.6

pts.

















Conversion rate


1.8

%

6.2

%

(4.4)

pts.

















Adjusted EBITDA

$

24.1

$

27.7

$

(3.6)






Adjusted EBITDA margin


2.0

%

2.2

%

(0.2)

pts.

















Effective income tax rate


121.4

%

19.0

%

102.4

pts.

















Average number of shares outstanding (millions):











     Basic


37.9


39.4








     Diluted


37.9


39.6








 

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 52 WEEKS ENDED JANUARY 1, 2023 AND  JANUARY 2, 2022

(UNAUDITED)

(In millions of dollars except per share data)









%


CC %




2022


2021


Change


Change


Change














Revenue from services

$

4,965.4

$

4,909.7

$

55.7


1.1

%

3.2

%













Cost of services


3,953.6


3,990.5


(36.9)


(0.9)
















Gross profit


1,011.8


919.2


92.6


10.1


12.1














Selling, general and administrative expenses


943.5


870.6


72.9


8.4


10.0














Goodwill impairment charge


41.0



41.0


NM
















Gain on sale of assets


(6.2)



(6.2)


NM
















Loss on disposal


18.7



18.7


NM
















Earnings from operations


14.8


48.6


(33.8)


(69.7)
















Gain (loss) on investment in Persol Holdings


(67.2)


121.8


(189.0)


NM
















Gain on insurance settlement



19.0


(19.0)


NM
















Loss on currency translation from liquidation of subsidiary

(20.4)



(20.4)


NM
















Other income (expense), net


1.6


(3.6)


5.2


146.4
















Earnings (loss) before taxes and equity in net earnings (loss) of affiliate


(71.2)


185.8


(257.0)


NM
















Income tax expense (benefit)


(7.9)


35.1


(43.0)


(122.6)
















Net earnings (loss) before equity in net earnings (loss) of affiliate


(63.3)


150.7


(214.0)


NM
















Equity in net earnings (loss) of affiliate


0.8


5.4


(4.6)


(85.9)
















Net earnings (loss)

$

(62.5)

$

156.1

$

(218.6)


NM

%















Basic earnings (loss) per share

$

(1.64)

$

3.93

$

(5.57)


NM

%



Diluted earnings (loss) per share

$

(1.64)

$

3.91

$

(5.55)


NM

%















STATISTICS:
























Permanent placement income (included in revenue from services)

$

89.6

$

75.4

$

14.2


18.9

%

21.9

%













Gross profit rate


20.4

%

18.7

%

1.7

pts.

















Conversion rate


1.5

%

5.3

%

(3.8)

pts.

















Adjusted EBITDA

$

105.6

$

84.1

$

21.5






Adjusted EBITDA margin


2.1

%

1.7

%

0.4

pts.

















Effective income tax rate


11.1

%

18.9

%

(7.8)

pts.

















Average number of shares outstanding (millions):












     Basic


38.1


39.4








     Diluted


38.1


39.5








 

KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)














Fourth Quarter














2022



2021


%

Change


CC %

Change


Professional & Industrial











Revenue from services

$

397.5


$

450.7


(11.8)

%

(11.2)

%

Gross profit


71.3



82.3


(13.3)


(12.6)


Total SG&A expenses


66.4



70.8


(6.1)


(5.7)


Earnings (loss) from operations


4.9



11.5


(57.9)















Gross profit rate


17.9

%


18.2

%

(0.3)

pts.














Science, Engineering & Technology











Revenue from services

$

302.7


$

297.7


1.7

%

2.0

%

Gross profit


71.7



66.1


8.5


8.7


Total SG&A expenses


53.5



49.2


8.7


8.8


Earnings (loss) from operations


18.2



16.9


7.8















Gross profit rate


23.7

%


22.2

%

1.5

pts.














Education











Revenue from services

$

203.0


$

132.4


53.3

%

53.3

%

Gross profit


31.1



21.1


47.2


47.2


Total SG&A expenses


21.4



15.6


37.0


37.0


Earnings (loss) from operations


9.7



5.5


76.2















Gross profit rate


15.3

%


15.9

%

(0.6)

pts.














Outsourcing & Consulting











Revenue from services

$

116.0


$

112.1


3.5

%

5.1

%

Gross profit


42.0



38.0


10.5


13.3


Total SG&A expenses


38.0



33.5


13.0


14.8


Goodwill impairment charge


10.3




NM




Earnings (loss) from operations


(6.3)



4.5


NM















Gross profit rate


36.3

%


34.0

%

2.3

pts.














International











Revenue from services

$

216.3


$

257.7


(16.1)

%

(8.4)

%

Gross profit


34.1



38.5


(11.7)


(3.4)


SG&A expenses excluding restructuring charges


33.3



35.5


(6.1)


1.7


Restructuring charges




1.2


NM


NM


Total SG&A expenses


33.3



36.7


(9.2)


(1.6)


Earnings (loss) from operations


0.8



1.8


(61.4)




Earnings (loss) from operations excluding restructuring charges


0.8



3.0


(76.7)















Gross profit rate


15.8

%


15.0

%

0.8

pts.



 

KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)














December Year to Date














2022



2021


%
Change


CC %
Change


Professional & Industrial











Revenue from services

$

1,666.2


$

1,837.4


(9.3)

%

(9.0)

%

Gross profit


302.5



310.0


(2.4)


(2.1)


Total SG&A expenses


270.5



278.6


(2.9)


(2.7)


Earnings (loss) from operations


32.0



31.4


1.8















Gross profit rate


18.2

%


16.9

%

1.3

pts.














Science, Engineering & Technology











Revenue from services

$

1,265.4


$

1,156.8


9.4

%

9.6

%

Gross profit


297.0



253.9


17.0


17.2


Total SG&A expenses


214.9



180.2


19.2


19.4


Earnings (loss) from operations


82.1



73.7


11.4















Gross profit rate


23.5

%


21.9

%

1.6

pts.














Education











Revenue from services

$

636.2


$

416.5


52.7

%

52.7

%

Gross profit


100.3



65.1


54.0


54.0


Total SG&A expenses


81.8



62.1


31.7


31.7


Earnings (loss) from operations


18.5



3.0


NM















Gross profit rate


15.8

%


15.6

%

0.2

pts.














Outsourcing & Consulting











Revenue from services

$

468.0


$

432.1


8.3

%

9.6

%

Gross profit


169.6



141.4


20.0


22.4


Total SG&A expenses


149.8



122.7


22.1


23.9


Goodwill impairment charge


41.0




NM




Earnings (loss) from operations


(21.2)



18.7


NM















Gross profit rate


36.3

%


32.7

%

3.6

pts.














International











Revenue from services

$

932.2


$

1,067.8


(12.7)

%

(4.7)

%

Gross profit


142.4



148.8


(4.3)


4.6


SG&A expenses excluding restructuring charges


132.5



137.7


(3.8)


4.5


Restructuring charges




1.2


NM


NM


Total SG&A expenses


132.5



138.9


(4.6)


3.6


Earnings (loss) from operations


9.9



9.9


(0.5)




Earnings (loss) from operations excluding restructuring charges


9.9



11.1


(11.2)















Gross profit rate


15.3

%


13.9

%

1.4

pts.



 

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions of dollars)



Jan.  1, 2023



Jan.  2, 2022


Current Assets







  Cash and equivalents

$

153.7


$

112.7


  Trade accounts receivable, less allowances of







    $11.2 and $12.6, respectively


1,491.6



1,423.2


  Prepaid expenses and other current assets


69.9



52.8


Total current assets


1,715.2



1,588.7









Noncurrent Assets







Property and equipment, net


27.8



35.3


Operating lease right-of-use assets


66.8



75.8


Deferred taxes


299.7



302.8


Goodwill, net


151.1



114.8


Investment in Persol Holdings




264.3


Investment in equity affiliate




123.4


Other assets


403.2



389.1


Total noncurrent assets


948.6



1,305.5









Total Assets

$

2,663.8


$

2,894.2









Current Liabilities







  Short-term borrowings

$

0.7


$


  Accounts payable and accrued liabilities


723.3



687.2


Operating lease liabilities


14.7



17.5


  Accrued payroll and related taxes


315.8



318.4


  Accrued workers' compensation and other claims


22.9



20.8


  Income and other taxes


51.4



51.3


Total current liabilities


1,128.8



1,095.2









Noncurrent Liabilities







Operating lease liabilities


55.0



61.4


Accrued payroll and related taxes




57.6


  Accrued workers' compensation and other claims


40.7



37.0


  Accrued retirement benefits


174.1



220.0


  Other long-term liabilities


11.0



86.8


Total noncurrent liabilities


280.8



462.8









Stockholders' Equity







  Common stock


38.5



40.1


  Treasury stock


(20.1)



(15.1)


  Paid-in capital


28.0



23.9


  Earnings invested in the business


1,216.3



1,315.0


  Accumulated other comprehensive income (loss)


(8.5)



(27.7)









Total stockholders' equity


1,254.2



1,336.2









Total Liabilities and Stockholders' Equity

$

2,663.8


$

2,894.2









Statistics:







 Working Capital

$

586.4


$

493.5


 Current Ratio


1.5



1.5


 Debt-to-capital %


0.1

%


0.0

%

 Global Days Sales Outstanding


61



60


 Year-to-Date Free Cash Flow

$

(88.3)


$

73.8


 

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE 52 WEEKS ENDED JANUARY 1, 2023 AND  JANUARY 2, 2022

(UNAUDITED)

(In millions of dollars)



2022


2021

Cash flows from operating activities:





Net earnings (loss)

$

(62.5)

$

156.1

Adjustments to reconcile net earnings to net cash from operating activities:





  Goodwill impairment charge


41.0


  Deferred income taxes


(72.1)


21.6

  Loss on disposal


18.7


  Depreciation and amortization


33.4


29.8

  Operating lease asset amortization


18.5


21.2

  Provision for credit losses and sales allowances


1.5


1.6

  Stock-based compensation


7.8


5.1

  (Gain) loss on investment in Persol Holdings


67.2


(121.8)

  Loss on cumulative translation adjustment reversal


20.4


  Gain on foreign currency remeasurement


(5.5)


  Gain on insurance settlement



(19.0)

  Gain on sale of assets


(6.2)


  Equity in net (earnings) loss of PersolKelly Pte. Ltd.


(0.8)


(5.4)

  Other, net


3.3


6.0

Changes in operating assets and liabilities, net of acquisitions


(141.0)


(10.2)

  Net cash (used in) from operating activities


(76.3)


85.0






Cash flows from investing activities:





Capital expenditures


(12.0)


(11.2)

Proceeds from sale of assets


10.1


Acquisition of companies, net of cash received


(143.1)


(213.0)

Cash disposed from sale of Russia, net of proceeds


(6.0)


Proceeds from sale of Persol Holdings investment


196.9


Proceeds from sale of equity method investment


119.5


Proceeds from company-owned life insurance


1.5


12.2

Proceeds from insurance settlement



19.0

Proceeds (payments) related to loans to equity affiliate



5.9

Proceeds from equity securities



5.0

Other investing activities


0.6


1.4

  Net cash from (used in) investing activities


167.5


(180.7)






Cash flows from financing activities:





Net change in short-term borrowings


0.8


(0.2)

Financing lease payments


(1.4)


(1.5)

Dividend payments


(10.6)


(4.0)

Payments of tax withholding for stock awards


(0.9)


(0.6)

Buyback of common shares


(27.2)


Purchase of treasury stock


(7.8)


Contingent consideration payments


(3.3)


(1.6)

Other financing activities


(0.2)


(0.2)

  Net cash used in financing activities


(50.6)


(8.1)






Effect of exchange rates on cash, cash equivalents and restricted cash


2.3


(4.8)






Net change in cash, cash equivalents and restricted cash


42.9


(108.6)

Cash, cash equivalents and restricted cash at beginning of year


119.5


228.1






Cash, cash equivalents and restricted cash at end of year

$

162.4

$

119.5

 

KELLY SERVICES, INC. AND SUBSIDIARIES

REVENUE FROM SERVICES

(UNAUDITED)

(In millions of dollars)













Fourth Quarter


















%


CC %




2022


2021


Change


Change












Americas










United States

$

925.0

$

908.6


1.8

%

1.8

%

Canada


45.5


38.1


19.6


28.8


Puerto Rico


27.6


25.5


8.2


8.2


Mexico


14.1


10.6


32.7


25.4


Total Americas Region


1,012.2


982.8