8-K
KELLY SERVICES INC (KELYA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 10, 2021
KELLY SERVICES, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 0-1088 | 38-1510762 |
|---|---|---|
| (State or other | (Commission | (IRS Employer |
| jurisdiction of | File Number) | Identification |
| incorporation) | Number) |
999 West Big Beaver Road, Troy, Michigan 48084
(Address of principal executive offices)
(Zip Code)
(248) 362-4444
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each<br><br>class | Trading<br><br>Symbols | Name of each exchange<br><br>on which registered |
|---|---|---|
| Class A Common | KELYA | NASDAQ Global Market |
| Class B Common | KELYB | NASDAQ Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
Kelly Services, Inc. (the “Company”) today released financial information containing highlighted financial data for the three and nine months ended October 3, 2021. A copy of the press release is attached as exhibit 99.1 herein.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated November 10, 2021. |
| 99.2 | Presentation materials for November 10, 2021 conference call. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| KELLY SERVICES, INC. | |
|---|---|
| November 10, 2021 | |
| /s/ Olivier G. Thirot<br><br>Olivier G. Thirot<br><br><br><br>Executive Vice President and Chief Financial Officer<br><br>(Principal Financial Officer) | |
| November 10, 2021 | |
| --- | --- |
| /s/ Laura S. Lockhart<br><br>Laura S. Lockhart<br><br><br><br>Vice President, Corporate Controller and<br><br>Chief Accounting Officer<br><br>(Principal Accounting Officer) |
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated November 10, 2021. |
| 99.2 | Presentation materials for November 10, 2021 conference call. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
4
Document
Exhibit 99.1
KELLY® REPORTS
THIRD-QUARTER 2021 EARNINGS AND ANNOUNCES DIVIDEND
Financial Highlights
•Q3 revenue up 15.1%; 14.5% in constant currency
•Q3 operating earnings of $9.0 million; up from a loss a year ago and up 25.9% on an adjusted basis
•Q3 earnings per share of $0.87 up from $0.42 a year ago; adjusted EPS of $0.25 compared to $0.29
TROY, Mich. (November 10, 2021) – Kelly® (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the third quarter of 2021.
Peter Quigley, president and chief executive officer, announced revenue for the third quarter of 2021 totaled $1.2 billion, a 15.1% increase compared to the corresponding quarter of 2020. Revenue improved year-over-year in the quarter reflecting increased customer demand compared to the COVID-19-impacted prior year period.
Earnings from operations in the third quarter of 2021 totaled $9.0 million, compared to a loss of $2.4 million reported in the third quarter of 2020. Included in the third quarter of 2020 was a $9.5 million charge related to a customer dispute in Mexico. On an adjusted basis, earnings from operations improved 25.9%.
Diluted earnings per share in the third quarter of 2021 were $0.87 compared to $0.42 per share in the third quarter of 2020. Included in the earnings per share is a non-cash gain per share, net of tax, on Kelly’s investment in Persol Holdings common stock of $0.62 in the third quarter of 2021 and $0.29 in the third quarter of 2020. On an adjusted basis, earnings per share were $0.25 in the third quarter of 2021 compared to $0.29 in the corresponding quarter of 2020.
“We’re pleased that all five of our specialty operating segments delivered organic year-over-year gains in the third quarter, contributing to solid revenue and GP dollar growth for the company,” said Quigley, who noted that Kelly has already begun taking actions to better leverage top-line growth heading into 2022. “Demand for our solutions is strong, and we’re finding innovative ways to connect talent and clients in a tight labor market. We’re confident that Kelly’s specialty strategy will continue to deliver top and bottom-line growth throughout the recovery and into the post-COVID environment.”
Kelly also reported that on November 10, its board of directors declared a dividend of $0.05 per share. The dividend is payable on December 8, 2021, to stockholders of record as of the close of business on November 24, 2021.
In conjunction with its third-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 November 10 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 November 10, 2021, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 2025741#. 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 recent 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, exposure to risks associated with investments in equity affiliates including PersolKelly Pte. Ltd., risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, 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 nearly 370,000 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 2020 was $4.5 billion. Visit kellyservices.com and let us help with what’s next for you.
#
| MEDIA CONTACT: | ANALYST CONTACT: | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Jane Stehney | James Polehna | ||||||||||
| (248) 765-6864 | (248) 244-4586 | ||||||||||
| stehnja@kellyservices.com | james.polehna@kellyservices.com | ||||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||
| FOR THE 13 WEEKS ENDED OCTOBER 3, 2021 AND SEPTEMBER 27, 2020 | |||||||||||
| (UNAUDITED) | |||||||||||
| (In millions of dollars except per share data) | |||||||||||
| % | CC % | ||||||||||
| 2021 | 2020 | Change | Change | Change | |||||||
| Revenue from services | $ | 1,195.4 | $ | 1,038.2 | $ | 157.2 | 15.1 | % | 14.5 | % | |
| Cost of services | 966.5 | 847.2 | 119.3 | 14.1 | |||||||
| Gross profit | 228.9 | 191.0 | 37.9 | 19.8 | 19.2 | ||||||
| Selling, general and administrative expenses | 219.9 | 193.4 | 26.5 | 13.7 | 13.2 | ||||||
| Earnings (loss) from operations | 9.0 | (2.4) | 11.4 | NM | |||||||
| Gain (loss) on investment in Persol Holdings | 35.5 | 16.8 | 18.7 | 112.0 | |||||||
| Other income (expense), net | (0.3) | (0.7) | 0.4 | 50.1 | |||||||
| Earnings (loss) before taxes and equity in net earnings (loss) of affiliate | 44.2 | 13.7 | 30.5 | 222.8 | |||||||
| Income tax expense (benefit) | 11.1 | (1.2) | 12.3 | NM | |||||||
| Net earnings (loss) before equity in net earnings (loss) of affiliate | 33.1 | 14.9 | 18.2 | 122.4 | |||||||
| Equity in net earnings (loss) of affiliate | 1.7 | 1.8 | (0.1) | (3.6) | |||||||
| Net earnings (loss) | $ | 34.8 | $ | 16.7 | $ | 18.1 | 108.9 | ||||
| Basic earnings (loss) per share | $ | 0.87 | $ | 0.42 | $ | 0.45 | 107.1 | ||||
| Diluted earnings (loss) per share | $ | 0.87 | $ | 0.42 | $ | 0.45 | 107.1 | ||||
| STATISTICS: | |||||||||||
| Permanent placement revenue (included in revenue from services) | $ | 19.7 | $ | 9.1 | $ | 10.6 | 118.0 | % | 116.6 | % | |
| Gross profit rate | 19.2 | % | 18.4 | % | 0.8 | pts. | |||||
| Conversion rate | 3.9 | % | (1.3) | % | 5.2 | pts. | |||||
| Adjusted EBITDA | $ | 17.3 | $ | 13.2 | $ | 4.1 | |||||
| Adjusted EBITDA margin | 1.4 | % | 1.3 | % | 0.1 | pts. | |||||
| Effective income tax rate | 25.2 | % | (8.5) | % | 33.7 | pts. | |||||
| Average number of shares outstanding (millions): | |||||||||||
| Basic | 39.4 | 39.3 | |||||||||
| Diluted | 39.5 | 39.4 | |||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||
| FOR THE 39 WEEKS ENDED OCTOBER 3, 2021 AND SEPTEMBER 27, 2020 | |||||||||||
| (UNAUDITED) | |||||||||||
| (In millions of dollars except per share data) | |||||||||||
| % | CC % | ||||||||||
| 2021 | 2020 | Change | Change | Change | |||||||
| Revenue from services | $ | 3,659.4 | $ | 3,274.6 | $ | 384.8 | 11.8 | % | 10.3 | % | |
| Cost of services | 2,986.2 | 2,671.1 | 315.1 | 11.8 | |||||||
| Gross profit | 673.2 | 603.5 | 69.7 | 11.5 | 10.1 | ||||||
| Selling, general and administrative expenses | 639.9 | 591.0 | 48.9 | 8.3 | 7.0 | ||||||
| Goodwill impairment charge | — | 147.7 | (147.7) | NM | |||||||
| Gain on sale of assets | — | (32.1) | 32.1 | NM | |||||||
| Earnings (loss) from operations | 33.3 | (103.1) | 136.4 | NM | |||||||
| Gain (loss) on investment in Persol Holdings | 71.8 | (31.4) | 103.2 | NM | |||||||
| Other income (expense), net | (4.0) | 3.6 | (7.6) | (211.5) | |||||||
| Earnings (loss) before taxes and equity in net earnings (loss) of affiliate | 101.1 | (130.9) | 232.0 | NM | |||||||
| Income tax expense (benefit) | 19.0 | (36.5) | 55.5 | 152.0 | |||||||
| Net earnings (loss) before equity in net earnings (loss) of affiliate | 82.1 | (94.4) | 176.5 | NM | |||||||
| Equity in net earnings (loss) of affiliate | 2.3 | (1.0) | 3.3 | NM | |||||||
| Net earnings (loss) | $ | 84.4 | $ | (95.4) | $ | 179.8 | NM | ||||
| Basic earnings (loss) per share | $ | 2.12 | $ | (2.43) | $ | 4.55 | NM | ||||
| Diluted earnings (loss) per share | $ | 2.12 | $ | (2.43) | $ | 4.55 | NM | ||||
| STATISTICS: | |||||||||||
| Permanent placement revenue (included in revenue from services) | $ | 54.3 | $ | 28.9 | $ | 25.4 | 87.8 | % | 84.5 | % | |
| Gross profit rate | 18.4 | % | 18.4 | % | — | pts. | |||||
| Conversion rate | 4.9 | % | (17.1) | % | 22.0 | pts. | |||||
| Adjusted EBITDA | $ | 56.4 | $ | 48.6 | $ | 7.8 | |||||
| Adjusted EBITDA margin | 1.5 | % | 1.5 | % | — | pts. | |||||
| Effective income tax rate | 18.8 | % | 27.9 | % | (9.1) | pts. | |||||
| Average number of shares outstanding (millions): | |||||||||||
| Basic | 39.4 | 39.3 | |||||||||
| Diluted | 39.5 | 39.3 | |||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| RESULTS OF OPERATIONS BY SEGMENT | |||||||||||
| (UNAUDITED) | |||||||||||
| (In millions of dollars) | |||||||||||
| Third Quarter | |||||||||||
| % | CC % | ||||||||||
| 2021 | 2020 | Change | Change | ||||||||
| Professional & Industrial | |||||||||||
| Revenue from services | $ | 452.6 | $ | 446.5 | 1.4 | % | 1.0 | % | |||
| Gross profit | 76.6 | 77.1 | (0.5) | (0.9) | |||||||
| SG&A expenses excluding restructuring charges | 69.4 | 65.4 | 6.2 | 5.9 | |||||||
| Restructuring charges | — | (0.1) | NM | NM | |||||||
| Total SG&A expenses | 69.4 | 65.3 | 6.2 | 5.9 | |||||||
| Earnings (loss) from operations | 7.2 | 11.8 | (38.1) | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 7.2 | 11.7 | (38.1) | ||||||||
| Gross profit rate | 16.9 | % | 17.3 | % | (0.4) | pts. | |||||
| Science, Engineering & Technology | |||||||||||
| Revenue from services | $ | 306.2 | $ | 244.0 | 25.5 | % | 25.3 | % | |||
| Gross profit | 68.1 | 50.7 | 34.5 | 34.4 | |||||||
| SG&A expenses excluding restructuring charges | 48.4 | 31.3 | 54.8 | 54.6 | |||||||
| Restructuring charges | — | — | NM | NM | |||||||
| Total SG&A expenses | 48.4 | 31.3 | 54.8 | 54.6 | |||||||
| Earnings (loss) from operations | 19.7 | 19.4 | 1.7 | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 19.7 | 19.4 | 1.7 | ||||||||
| Gross profit rate | 22.3 | % | 20.8 | % | 1.5 | pts. | |||||
| Education | |||||||||||
| Revenue from services | $ | 66.6 | $ | 27.5 | 142.1 | % | 142.1 | % | |||
| Gross profit | 10.0 | 4.1 | 139.7 | 139.7 | |||||||
| SG&A expenses excluding restructuring charges | 17.0 | 11.6 | 45.9 | 45.9 | |||||||
| Restructuring charges | — | — | NM | NM | |||||||
| Total SG&A expenses | 17.0 | 11.6 | 46.1 | 46.1 | |||||||
| Earnings (loss) from operations | (7.0) | (7.5) | 6.6 | ||||||||
| Earnings (loss) from operations excluding restructuring charges | (7.0) | (7.5) | 6.7 | ||||||||
| Gross profit rate | 15.1 | % | 15.2 | % | (0.1) | pts. | |||||
| Outsourcing & Consulting | |||||||||||
| Revenue from services | $ | 113.4 | $ | 87.9 | 29.1 | % | 28.6 | % | |||
| Gross profit | 37.3 | 29.1 | 27.9 | 26.9 | |||||||
| SG&A expenses excluding restructuring charges | 30.7 | 25.4 | 20.5 | 19.8 | |||||||
| Restructuring charges | — | — | NM | NM | |||||||
| Total SG&A expenses | 30.7 | 25.4 | 20.5 | 19.7 | |||||||
| Earnings (loss) from operations | 6.6 | 3.7 | 79.1 | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 6.6 | 3.7 | 78.7 | ||||||||
| Gross profit rate | 32.8 | % | 33.1 | % | (0.3) | pts. | |||||
| International | |||||||||||
| Revenue from services | $ | 256.8 | $ | 232.4 | 10.5 | % | 8.8 | % | |||
| Gross profit | 36.9 | 30.0 | 22.7 | 21.0 | |||||||
| SG&A expenses excluding restructuring charges | 34.5 | 39.9 | (13.6) | (14.8) | |||||||
| Restructuring charges | — | — | NM | NM | |||||||
| Total SG&A expenses | 34.5 | 39.9 | (13.6) | (14.8) | |||||||
| Earnings (loss) from operations | 2.4 | (9.9) | NM | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 2.4 | (9.9) | NM | ||||||||
| Gross profit rate | 14.4 | % | 12.9 | % | 1.5 | pts. | |||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| RESULTS OF OPERATIONS BY SEGMENT | |||||||||||
| (UNAUDITED) | |||||||||||
| (In millions of dollars) | |||||||||||
| September Year to Date | |||||||||||
| % | CC % | ||||||||||
| 2021 | 2020 | Change | Change | ||||||||
| Professional & Industrial | |||||||||||
| Revenue from services | $ | 1,386.7 | $ | 1,346.7 | 3.0 | % | 2.5 | % | |||
| Gross profit | 227.7 | 241.1 | (5.5) | (6.0) | |||||||
| SG&A expenses excluding restructuring charges | 207.8 | 206.1 | 0.8 | 0.5 | |||||||
| Restructuring charges | — | 4.3 | NM | NM | |||||||
| Total SG&A expenses | 207.8 | 210.4 | (1.2) | (1.6) | |||||||
| Earnings (loss) from operations | 19.9 | 30.7 | (34.9) | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 19.9 | 35.0 | (43.0) | ||||||||
| Gross profit rate | 16.4 | % | 17.9 | % | (1.5) | pts. | |||||
| Science, Engineering & Technology | |||||||||||
| Revenue from services | $ | 859.1 | $ | 761.5 | 12.8 | % | 12.6 | % | |||
| Gross profit | 187.8 | 156.0 | 20.4 | 20.2 | |||||||
| SG&A expenses excluding restructuring charges | 131.0 | 98.6 | 32.9 | 32.7 | |||||||
| Restructuring charges | — | 0.5 | NM | NM | |||||||
| Total SG&A expenses | 131.0 | 99.1 | 32.2 | 32.0 | |||||||
| Earnings (loss) from operations | 56.8 | 56.9 | (0.2) | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 56.8 | 57.4 | (1.1) | ||||||||
| Gross profit rate | 21.9 | % | 20.5 | % | 1.4 | pts. | |||||
| Education | |||||||||||
| Revenue from services | $ | 284.1 | $ | 195.1 | 45.6 | % | 45.6 | % | |||
| Gross profit | 44.0 | 28.8 | 52.5 | 52.5 | |||||||
| SG&A expenses excluding restructuring charges | 46.5 | 36.9 | 26.0 | 26.0 | |||||||
| Restructuring charges | — | 0.8 | NM | NM | |||||||
| Total SG&A expenses | 46.5 | 37.7 | 23.1 | 23.1 | |||||||
| Earnings (loss) from operations | (2.5) | (8.9) | 72.1 | ||||||||
| Earnings (loss) from operations excluding restructuring charges | (2.5) | (8.1) | 69.0 | ||||||||
| Gross profit rate | 15.5 | % | 14.8 | % | 0.7 | pts. | |||||
| Outsourcing & Consulting | |||||||||||
| Revenue from services | $ | 320.0 | $ | 261.0 | 22.6 | % | 21.2 | % | |||
| Gross profit | 103.4 | 87.1 | 18.7 | 16.3 | |||||||
| SG&A expenses excluding restructuring charges | 89.2 | 79.1 | 12.7 | 10.9 | |||||||
| Restructuring charges | — | — | NM | NM | |||||||
| Total SG&A expenses | 89.2 | 79.1 | 12.6 | 10.8 | |||||||
| Earnings (loss) from operations | 14.2 | 8.0 | 79.0 | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 14.2 | 8.0 | 77.5 | ||||||||
| Gross profit rate | 32.3 | % | 33.4 | % | (1.1) | pts. | |||||
| International | |||||||||||
| Revenue from services | $ | 810.1 | $ | 710.6 | 14.0 | % | 9.0 | % | |||
| Gross profit | 110.3 | 90.5 | 21.8 | 16.3 | |||||||
| SG&A expenses excluding restructuring charges | 102.2 | 100.3 | 1.8 | (2.8) | |||||||
| Restructuring charges | — | 1.1 | NM | NM | |||||||
| Total SG&A expenses | 102.2 | 101.4 | 0.7 | (3.9) | |||||||
| Earnings (loss) from operations | 8.1 | (10.9) | NM | ||||||||
| Earnings (loss) from operations excluding restructuring charges | 8.1 | (9.8) | NM | ||||||||
| Gross profit rate | 13.6 | % | 12.7 | % | 0.9 | pts. | |||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (UNAUDITED) | |||||||||||
| (In millions of dollars) | |||||||||||
| October 3, 2021 | January 3, 2021 | September 27, 2020 | |||||||||
| Current Assets | |||||||||||
| Cash and equivalents | 43.5 | $ | 223.0 | $ | 248.2 | ||||||
| Trade accounts receivable, less allowances of | |||||||||||
| 12.3, 13.3, and 11.4, respectively | 1,423.9 | 1,265.2 | 1,111.4 | ||||||||
| Prepaid expenses and other current assets | 71.0 | 61.4 | 71.4 | ||||||||
| Total current assets | 1,538.4 | 1,549.6 | 1,431.0 | ||||||||
| Noncurrent Assets | |||||||||||
| Property and equipment, net | 36.1 | 41.0 | 40.8 | ||||||||
| Operating lease right-of-use assets | 79.3 | 83.2 | 84.0 | ||||||||
| Deferred taxes | 304.0 | 282.0 | 273.3 | ||||||||
| Goodwill, net | 114.8 | 3.5 | — | ||||||||
| Investment in Persol Holdings | 222.6 | 164.2 | 145.8 | ||||||||
| Investment in equity affiliate | 122.0 | 118.5 | 115.6 | ||||||||
| Other assets | 386.3 | 319.9 | 301.2 | ||||||||
| Total noncurrent assets | 1,265.1 | 1,012.3 | 960.7 | ||||||||
| Total Assets | 2,803.5 | $ | 2,561.9 | $ | 2,391.7 | ||||||
| Current Liabilities | |||||||||||
| Short-term borrowings | — | $ | 0.3 | $ | 0.5 | ||||||
| Accounts payable and accrued liabilities | 645.2 | 536.8 | 458.4 | ||||||||
| Operating lease liabilities | 18.4 | 19.6 | 19.5 | ||||||||
| Accrued payroll and related taxes | 334.9 | 293.0 | 240.7 | ||||||||
| Accrued workers' compensation and other claims | 21.1 | 22.7 | 25.0 | ||||||||
| Income and other taxes | 58.4 | 53.2 | 52.4 | ||||||||
| Total current liabilities | 1,078.0 | 925.6 | 796.5 | ||||||||
| Noncurrent Liabilities | |||||||||||
| Operating lease liabilities | 64.1 | 67.5 | 68.1 | ||||||||
| Accrued payroll and related taxes | 58.2 | 58.5 | 75.7 | ||||||||
| Accrued workers' compensation and other claims | 39.1 | 42.2 | 44.4 | ||||||||
| Accrued retirement benefits | 213.5 | 205.8 | 188.2 | ||||||||
| Other long-term liabilities | 76.5 | 59.3 | 52.7 | ||||||||
| Total noncurrent liabilities | 451.4 | 433.3 | 429.1 | ||||||||
| Stockholders' Equity | |||||||||||
| Common stock | 40.1 | 40.1 | 40.1 | ||||||||
| Treasury stock | (15.2) | (17.1) | (17.2) | ||||||||
| Paid-in capital | 23.2 | 21.3 | 20.6 | ||||||||
| Earnings invested in the business | 1,245.3 | 1,162.9 | 1,139.5 | ||||||||
| Accumulated other comprehensive income (loss) | (19.3) | (4.2) | (16.9) | ||||||||
| Total stockholders' equity | 1,274.1 | 1,203.0 | 1,166.1 | ||||||||
| Total Liabilities and Stockholders' Equity | 2,803.5 | $ | 2,561.9 | $ | 2,391.7 | ||||||
| STATISTICS: | |||||||||||
| Working Capital | 460.4 | $ | 624.0 | $ | 634.5 | ||||||
| Current Ratio | 1.4 | 1.7 | 1.8 | ||||||||
| Debt-to-capital % | 0.0 | % | 0.0 | % | 0.0 | % | |||||
| Global Days Sales Outstanding | 63 | 64 | 61 | ||||||||
| Year-to-Date Free Cash Flow | 23.5 | $ | 170.5 | $ | 204.2 |
All values are in US Dollars.
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| FOR THE 39 WEEKS ENDED OCTOBER 3, 2021 AND SEPTEMBER 27, 2020 | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net earnings (loss) | $ | 84.4 | $ | (95.4) | ||||||||||||
| Adjustments to reconcile net earnings (loss) to net cash from operating activities: | ||||||||||||||||
| Goodwill impairment charge | — | 147.7 | ||||||||||||||
| Deferred income taxes on goodwill impairment charge | — | (23.0) | ||||||||||||||
| Depreciation and amortization | 22.0 | 18.0 | ||||||||||||||
| Operating lease asset amortization | 16.0 | 15.9 | ||||||||||||||
| Provision for credit losses and sales allowances | 0.8 | 10.7 | ||||||||||||||
| Stock-based compensation | 4.0 | 2.9 | ||||||||||||||
| (Gain) loss on investment in Persol Holdings | (71.8) | 31.4 | ||||||||||||||
| Gain on sale of assets | — | (32.1) | ||||||||||||||
| Equity in net (earnings) loss of PersolKelly Pte. Ltd. | (2.3) | 1.0 | ||||||||||||||
| Other, net | 4.6 | 1.8 | ||||||||||||||
| Changes in operating assets and liabilities, net of acquisitions | (26.7) | 137.6 | ||||||||||||||
| Net cash from operating activities | 31.0 | 216.5 | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Capital expenditures | (7.5) | (12.3) | ||||||||||||||
| Proceeds from sale of assets | — | 55.5 | ||||||||||||||
| Acquisition of companies, net of cash received | (213.0) | (36.4) | ||||||||||||||
| Proceeds from company-owned life insurance | 10.4 | 2.3 | ||||||||||||||
| Proceeds from sale of Brazil, net of cash disposed | — | 1.2 | ||||||||||||||
| Proceeds from loans with equity affiliate | 5.8 | — | ||||||||||||||
| Proceeds from (investment in) equity securities | 5.0 | (0.2) | ||||||||||||||
| Other investing activities | 0.9 | 0.2 | ||||||||||||||
| Net cash (used in) from investing activities | (198.4) | 10.3 | ||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Net change in short-term borrowings | (0.2) | (1.5) | ||||||||||||||
| Financing lease payments | (1.3) | (1.0) | ||||||||||||||
| Dividend payments | (2.0) | (3.0) | ||||||||||||||
| Payments of tax withholding for stock awards | (0.6) | (1.2) | ||||||||||||||
| Contingent consideration payments | (1.6) | — | ||||||||||||||
| Other financing activities | — | (0.1) | ||||||||||||||
| Net cash used in financing activities | (5.7) | (6.8) | ||||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (3.9) | 3.4 | ||||||||||||||
| Net change in cash, cash equivalents and restricted cash | (177.0) | 223.4 | ||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 228.1 | 31.0 | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 51.1 | $ | 254.4 | ||||||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| REVENUE FROM SERVICES BY GEOGRAPHY | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| Third Quarter | ||||||||||||||||
| % | CC % | |||||||||||||||
| 2021 | 2020 | Change | Change | |||||||||||||
| Americas | ||||||||||||||||
| United States | $ | 851.7 | $ | 740.6 | 15.0 | % | 15.0 | % | ||||||||
| Canada | 43.3 | 30.3 | 42.8 | 35.1 | ||||||||||||
| Puerto Rico | 25.5 | 18.4 | 39.2 | 39.2 | ||||||||||||
| Mexico | 14.4 | 27.4 | (47.4) | (52.7) | ||||||||||||
| Brazil | — | 1.8 | NM | NM | ||||||||||||
| Total Americas Region | 934.9 | 818.5 | 14.2 | 13.8 | ||||||||||||
| Europe | ||||||||||||||||
| France | 56.3 | 48.8 | 15.4 | 14.3 | ||||||||||||
| Switzerland | 54.5 | 49.6 | 10.0 | 9.8 | ||||||||||||
| Portugal | 36.6 | 31.7 | 15.6 | 14.6 | ||||||||||||
| Russia | 33.0 | 27.2 | 21.3 | 21.1 | ||||||||||||
| Italy | 18.5 | 14.5 | 27.5 | 26.4 | ||||||||||||
| United Kingdom | 17.2 | 16.4 | 4.5 | (2.1) | ||||||||||||
| Germany | 9.0 | 7.0 | 28.2 | 27.3 | ||||||||||||
| Ireland | 7.4 | 4.9 | 49.9 | 48.8 | ||||||||||||
| Other | 17.3 | 12.0 | 44.4 | 43.0 | ||||||||||||
| Total Europe Region | 249.8 | 212.1 | 17.8 | 16.6 | ||||||||||||
| Total Asia-Pacific Region | 10.7 | 7.6 | 41.4 | 39.3 | ||||||||||||
| Total Kelly Services, Inc. | $ | 1,195.4 | $ | 1,038.2 | 15.1 | % | 14.5 | % | ||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| REVENUE FROM SERVICES BY GEOGRAPHY | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| September Year to Date | ||||||||||||||||
| % | CC % | |||||||||||||||
| 2021 | 2020 | Change | Change | |||||||||||||
| Americas | ||||||||||||||||
| United States | $ | 2,604.8 | $ | 2,369.2 | 9.9 | % | 9.9 | % | ||||||||
| Canada | 116.9 | 88.7 | 31.8 | 21.9 | ||||||||||||
| Mexico | 82.1 | 78.6 | 4.5 | (1.8) | ||||||||||||
| Puerto Rico | 76.6 | 56.1 | 36.6 | 36.6 | ||||||||||||
| Brazil | — | 17.0 | NM | NM | ||||||||||||
| Total Americas Region | 2,880.4 | 2,609.6 | 10.4 | 9.8 | ||||||||||||
| Europe | ||||||||||||||||
| France | 168.1 | 141.2 | 19.0 | 11.9 | ||||||||||||
| Switzerland | 161.2 | 141.2 | 14.2 | 9.6 | ||||||||||||
| Portugal | 120.9 | 99.1 | 22.0 | 14.5 | ||||||||||||
| Russia | 99.3 | 88.6 | 12.1 | 17.5 | ||||||||||||
| Italy | 56.0 | 42.5 | 31.7 | 23.9 | ||||||||||||
| United Kingdom | 51.9 | 56.5 | (8.2) | (15.8) | ||||||||||||
| Germany | 24.6 | 22.1 | 11.3 | 5.1 | ||||||||||||
| Ireland | 18.8 | 14.0 | 34.1 | 26.8 | ||||||||||||
| Other | 49.9 | 38.7 | 29.0 | 21.6 | ||||||||||||
| Total Europe Region | 750.7 | 643.9 | 16.6 | 11.6 | ||||||||||||
| Total Asia-Pacific Region | 28.3 | 21.1 | 33.9 | 24.9 | ||||||||||||
| Total Kelly Services, Inc. | $ | 3,659.4 | $ | 3,274.6 | 11.8 | % | 10.3 | % | ||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | |||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
| THIRD QUARTER | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| SG&A Expenses: | As Reported | Restructuring(5) | Adjusted | Adjusted | ||||||||||||
| Professional & Industrial | $ | 69.4 | $ | — | $ | 69.4 | $ | 65.4 | ||||||||
| Science, Engineering & Technology | 48.4 | — | 48.4 | 31.3 | ||||||||||||
| Education | 17.0 | — | 17.0 | 11.6 | ||||||||||||
| Outsourcing & Consulting | 30.7 | — | 30.7 | 25.4 | ||||||||||||
| International | 34.5 | — | 34.5 | 30.4 | ||||||||||||
| Corporate | 19.9 | 0.1 | 20.0 | 19.9 | ||||||||||||
| Total Company | $ | 219.9 | $ | 0.1 | $ | 220.0 | $ | 184.0 | ||||||||
| 2021 | 2020 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | |||||||||||
| Earnings (loss) from Operations: | As Reported | Restructuring(5) | Adjusted | Adjusted | ||||||||||||
| Professional & Industrial | $ | 7.2 | $ | — | $ | 7.2 | $ | 11.7 | ||||||||
| Science, Engineering & Technology | 19.7 | — | 19.7 | 19.4 | ||||||||||||
| Education | (7.0) | — | (7.0) | (7.5) | ||||||||||||
| Outsourcing & Consulting | 6.6 | — | 6.6 | 3.7 | ||||||||||||
| International | 2.4 | — | 2.4 | (0.4) | ||||||||||||
| Corporate | (19.9) | (0.1) | (20.0) | (19.9) | ||||||||||||
| Total Company | $ | 9.0 | $ | (0.1) | $ | 8.9 | $ | 7.0 | ||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
| THIRD QUARTER | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| 2020 | ||||||||||||||||
| SG&A Expenses: | As Reported | Customer Dispute(4) | Restructuring(5) | Adjusted | ||||||||||||
| Professional & Industrial | $ | 65.3 | $ | — | $ | 0.1 | $ | 65.4 | ||||||||
| Science, Engineering & Technology | 31.3 | — | — | 31.3 | ||||||||||||
| Education | 11.6 | — | — | 11.6 | ||||||||||||
| Outsourcing & Consulting | 25.4 | — | — | 25.4 | ||||||||||||
| International | 39.9 | (9.5) | — | 30.4 | ||||||||||||
| Corporate | 19.9 | — | — | 19.9 | ||||||||||||
| Total Company | $ | 193.4 | $ | (9.5) | $ | 0.1 | $ | 184.0 | 2020 | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Earnings (loss) from Operations: | As Reported | Customer Dispute(4) | Restructuring(5) | Adjusted | ||||||||||||
| Professional & Industrial | $ | 11.8 | $ | — | $ | (0.1) | $ | 11.7 | ||||||||
| Science, Engineering & Technology | 19.4 | — | — | 19.4 | ||||||||||||
| Education | (7.5) | — | — | (7.5) | ||||||||||||
| Outsourcing & Consulting | 3.7 | — | — | 3.7 | ||||||||||||
| International | (9.9) | 9.5 | — | (0.4) | ||||||||||||
| Corporate | (19.9) | — | — | (19.9) | ||||||||||||
| Total Company | $ | (2.4) | $ | 9.5 | $ | (0.1) | $ | 7.0 | ||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | |||||||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
| SEPTEMBER YEAR TO DATE | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| SG&A Expenses: | As Reported | Restructuring(5) | Adjusted | Adjusted | ||||||||||||
| Professional & Industrial | $ | 207.8 | $ | — | $ | 207.8 | $ | 206.1 | ||||||||
| Science, Engineering & Technology | 131.0 | — | 131.0 | 98.6 | ||||||||||||
| Education | 46.5 | — | 46.5 | 36.9 | ||||||||||||
| Outsourcing & Consulting | 89.2 | — | 89.2 | 79.1 | ||||||||||||
| International | 102.2 | — | 102.2 | 90.8 | ||||||||||||
| Corporate | 63.2 | 0.1 | 63.3 | 61.6 | ||||||||||||
| Total Company | $ | 639.9 | $ | 0.1 | $ | 640.0 | $ | 573.1 | ||||||||
| 2021 | 2020 | |||||||||||||||
| --- | --- | --- | --- | |||||||||||||
| Earnings (loss) from Operations: | As Reported | Restructuring(5) | Adjusted | Adjusted | ||||||||||||
| Professional & Industrial | $ | 19.9 | $ | — | $ | 19.9 | $ | 35.0 | ||||||||
| Science, Engineering & Technology | 56.8 | — | 56.8 | 57.4 | ||||||||||||
| Education | (2.5) | — | (2.5) | (8.1) | ||||||||||||
| Outsourcing & Consulting | 14.2 | — | 14.2 | 8.0 | ||||||||||||
| International | 8.1 | — | 8.1 | (0.3) | ||||||||||||
| Corporate | (63.2) | (0.1) | (63.3) | (61.6) | ||||||||||||
| Total Company | $ | 33.3 | $ | (0.1) | $ | 33.2 | $ | 30.4 | ||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
| SEPTEMBER YEAR TO DATE | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars) | ||||||||||||||||
| 2020 | ||||||||||||||||
| SG&A Expenses: | As Reported | Customer Dispute(4) | Restructuring(5) | Adjusted | ||||||||||||
| Professional & Industrial | $ | 210.4 | $ | — | $ | (4.3) | $ | 206.1 | ||||||||
| Science, Engineering & Technology | 99.1 | — | (0.5) | 98.6 | ||||||||||||
| Education | 37.7 | — | (0.8) | 36.9 | ||||||||||||
| Outsourcing & Consulting | 79.1 | — | — | 79.1 | ||||||||||||
| International | 101.4 | (9.5) | (1.1) | 90.8 | ||||||||||||
| Corporate | 63.3 | — | (1.7) | 61.6 | ||||||||||||
| Total Company | $ | 591.0 | $ | (9.5) | $ | (8.4) | $ | 573.1 | ||||||||
| 2020 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Earnings (loss) from Operations: | As Reported | Goodwill impairment(1) | Gain on sale<br><br>of assets(3) | Customer Dispute(4) | Restructuring(5) | Adjusted | ||||||||||
| Professional & Industrial | $ | 30.7 | $ | — | $ | — | $ | — | $ | 4.3 | $ | 35.0 | ||||
| Science, Engineering & Technology | 56.9 | — | — | — | 0.5 | 57.4 | ||||||||||
| Education | (8.9) | — | — | — | 0.8 | (8.1) | ||||||||||
| Outsourcing & Consulting | 8.0 | — | — | — | — | 8.0 | ||||||||||
| International | (10.9) | — | — | 9.5 | 1.1 | (0.3) | ||||||||||
| Corporate | (178.9) | 147.7 | (32.1) | — | 1.7 | (61.6) | ||||||||||
| Total Company | $ | (103.1) | $ | 147.7 | $ | (32.1) | $ | 9.5 | $ | 8.4 | $ | 30.4 | ||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars except per share data) | ||||||||||||||||
| Third Quarter | September Year to Date | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Income tax expense (benefit) | $ | 11.1 | $ | (1.2) | $ | 19.0 | $ | (36.5) | ||||||||
| Taxes on goodwill impairment charge(1) | — | — | — | 23.0 | ||||||||||||
| Taxes on investment in Persol Holdings(2) | (10.9) | (5.2) | (22.0) | 9.6 | ||||||||||||
| Taxes on gain on sale of assets(3) | — | — | — | (8.1) | ||||||||||||
| Taxes on customer dispute(4) | — | 2.8 | — | 2.8 | ||||||||||||
| Taxes on restructuring charges(5) | — | — | — | 2.2 | ||||||||||||
| Adjusted income tax expense (benefit) | $ | 0.2 | $ | (3.6) | $ | (3.0) | $ | (7.0) | ||||||||
| Third Quarter | September Year to Date | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net earnings (loss) | $ | 34.8 | $ | 16.7 | $ | 84.4 | $ | (95.4) | ||||||||
| Goodwill impairment charge, net of taxes(1) | — | — | — | 124.7 | ||||||||||||
| (Gain) loss on investment in Persol Holdings, net of taxes(2) | (24.6) | (11.6) | (49.8) | 21.8 | ||||||||||||
| (Gain) loss on sale of assets, net of taxes(3) | — | 0.1 | — | (23.9) | ||||||||||||
| Customer dispute, net of taxes(4) | — | 6.7 | — | 6.7 | ||||||||||||
| Restructuring charges, net of taxes(5) | (0.1) | (0.1) | (0.1) | 6.2 | ||||||||||||
| Adjusted net earnings | $ | 10.1 | $ | 11.8 | $ | 34.5 | $ | 40.1 | ||||||||
| Third Quarter | September Year to Date | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Per Share | Per Share | |||||||||||||||
| Net earnings (loss) | $ | 0.87 | $ | 0.42 | $ | 2.12 | $ | (2.43) | ||||||||
| Goodwill impairment charge, net of taxes(1) | — | — | — | 3.18 | ||||||||||||
| (Gain) loss on investment in Persol Holdings, net of taxes(2) | (0.62) | (0.29) | (1.25) | 0.56 | ||||||||||||
| Gain on sale of assets, net of taxes(3) | — | — | — | (0.61) | ||||||||||||
| Customer dispute, net of taxes(4) | — | 0.17 | — | 0.17 | ||||||||||||
| Restructuring charges, net of taxes(5) | — | — | — | 0.16 | ||||||||||||
| Adjusted net earnings | $ | 0.25 | $ | 0.29 | $ | 0.86 | $ | 1.02 |
Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||||||
| (UNAUDITED) | ||||||||||||
| (In millions of dollars) | ||||||||||||
| Third Quarter | September Year to Date | |||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net earnings (loss) | $ | 34.8 | $ | 16.7 | $ | 84.4 | $ | (95.4) | ||||
| Other (income) expense, net | 0.3 | 0.7 | 4.0 | (3.6) | ||||||||
| Income tax expense (benefit) | 11.1 | (1.2) | 19.0 | (36.5) | ||||||||
| Depreciation and amortization | 8.4 | 6.2 | 23.2 | 18.2 | ||||||||
| EBITDA | 54.6 | 22.4 | 130.6 | (117.3) | ||||||||
| Equity in net (earnings) loss of affiliate | (1.7) | (1.8) | (2.3) | 1.0 | ||||||||
| Goodwill impairment charge(1) | — | — | — | 147.7 | ||||||||
| (Gain) loss on investment in Persol Holdings(2) | (35.5) | (16.8) | (71.8) | 31.4 | ||||||||
| Gain on sale of assets(3) | — | — | — | (32.1) | ||||||||
| Customer dispute(4) | — | 9.5 | — | 9.5 | ||||||||
| Restructuring(5) | (0.1) | (0.1) | (0.1) | 8.4 | ||||||||
| Adjusted EBITDA | $ | 17.3 | $ | 13.2 | $ | 56.4 | $ | 48.6 | ||||
| Adjusted EBITDA margin | 1.4 | % | 1.3 | % | 1.5 | % | 1.5 | % |
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2020 goodwill impairment charge, the 2021 and 2020 gains and losses on the investment in Persol Holdings, the 2020 gain on sale of assets, the 2020 customer dispute and the 2020 restructuring charges, are useful to understand the Company's fiscal 2021 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods. Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance.
Management uses Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA Margin (percent of total GAAP revenue) which Management believes is useful to compare operating performance compared to prior periods and uses it in conjunction with GAAP measures to assess performance. Our calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies and should be used in conjunction with GAAP measurements.
These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company's financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company's financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
(1) The goodwill impairment charge is the result of an interim impairment test the Company performed during the first quarter of 2020, due to a triggering event caused by a decline in the Company's common stock price.
(2) The gains and losses on the investment in Persol Holdings represent the change in fair value of the investment during the period presented and the related tax expense and benefit.
(3) Gain on sale of assets in 2020 primarily represents the excess of the proceeds over the cost of the headquarters properties sold during the first quarter of 2020.
(4) Customer dispute represents a non-cash charge in Mexico to increase the reserve against a long-term receivable from a former customer based on an updated probability of loss assessment.
(5) Restructuring charges in 2020 and subsequent adjustments in 2021 represent severance costs and lease terminations in preparation for the new operating model adopted in the third quarter of 2020.
17
q32021earningsreleasesup
THIRD QUARTER 2021 November 10, 2021 Exhibit 99.2
NON-GAAP MEASURES | 2 Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2021 and 2020 gains and losses on the investment in Persol Holdings, the 2020 loss on sale of assets, the 2020 customer dispute and the 2021 and 2020 restructuring accrual adjustments, are useful to understand the Company's fiscal 2021 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods. Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance. Management uses Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA Margin (percent of total GAAP revenue) which Management believes is useful to compare operating performance compared to prior periods and uses it in conjunction with GAAP measures to assess performance. Our calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies and should be used in conjunction with GAAP measurements. These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company's financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company's financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
SAFE HARBOR STATEMENT | 3 This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. The principal important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, changing market and economic conditions, the recent 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, exposure to risks associated with investments in equity affiliates including PersolKelly Pte. Ltd., risks associated with conducting business in foreign countries, including foreign currency fluctuations, the exposure to potential market and currency exchange risks relating to our investment in Persol Holdings, risks associated with violations of anticorruption, 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 report and in our other 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.
THIRD QUARTER 2021 TAKEAWAYS | 4 Economic recovery continues but moderates on impact of Delta variant • Q3 revenue up 15.1% on a reported basis, up 14.5% in constant currency(1) ‒ Includes 320 bps impact from the acquisition of Softworld, Inc. (“Softworld”) on April 5, 2021 • For the second consecutive quarter, all operating segments have returned to year-over-year revenue growth and total Company revenue recovery ratio(2) is up 200 bps to 91% Near-term steps to capitalize on improving demand • Continuing robust return to workplace protocols and addressing masking and vaccine mandates by regulators and customers • Addressing talent supply in Education and talent supply and fulfillment challenges in Professional & Industrial to meet customer demand and accelerate revenue growth • Executing cost management actions expected to result in structural cost savings beginning in Q1 2022 while continuing with organic investment in our selected specialties Continued focus on our future • Using Helix UX technology to enable customers to better understand and manage their global workforce and deepen their relationship with Kelly • Addressing the structural skills mismatch with Equity@Work to tackle systemic barriers that prevent people from connecting with work, including Kelly 33, a program to connect talented job seekers who have non- violent, non-relevant criminal background with customers in need of their skills (1)Constant Currency represents year-over-year changes resulting from translating 2021 financial data into USD using 2020 exchange rates. (2)Recovery ratio is defined as 2021 organic revenue on a 2019 constant currency basis divided by 2019 revenue.
THIRD QUARTER 2021 FINANCIAL SUMMARY | 5 (1)See reconciliation of Non-GAAP Measures included in Form 8-K dated November 10, 2021. (2)Constant Currency ("CC") represents year-over-year changes resulting from translating 2021 financial data into USD using 2020 exchange rates. Actual Results $1.2B 15.1% 15.1% 14.5% CC(2) 14.5% CC(2) 19.2% 80 bps 80 bps $9.0M NM 25.9% NM CC(2) 22.2% CC(2) Adjusted EBITDA(1) $17.3M 29.9% Adjusted EBITDA Margin(1) 1.4% 10 bps Change Increase/(Decrease) As Adjusted(1) Earnings from Operations Revenue Gross Profit % As Reported
| 6 REVENUE TRENDS Percent in Constant Currency(1) (1)Constant Currency represents year-over-year changes resulting from translating 2021 financial data into USD using 2020 exchange rates. (2)Includes the 2021 results of Softworld, which was acquired as of April 5, 2021, and was included in the reported results of operations in Science, Engineering & Technology from the date of acquisition. (3)Recovery rate is defined as 2021 organic revenue on a 2019 constant currency basis divided by 2019 revenue. Q3 2021(2) Q3 2021 (Recovery Rate(3)) Q2 2021 (Recovery Rate(3)) Total 14.5% 91% 89% Professional & Industrial 1.0% 84% 83% Science, Engineering & Technology 25.3% 95% 91% Education 142.1% 117% 90% Outsourcing & Consulting 28.6% 119% 111% International 8.8% 85% 89%
18.4% 19.2% 17.0% 17.5% 18.0% 18.5% 19.0% 19.5% 20.0% 20.5% 21.0% Q3 2020 GP Rate Softworld Perm Fees Professional & Industrial All Other Q3 2021 GP Rate THIRD QUARTER 2021 GROSS PROFIT RATE GROWTH | 7 (50) bps50 bps 90 bps (10) bps • Overall GP rate improved as a result of higher perm fees and the acquisition of Softworld, which generates higher gross profit rates. This was partially offset by unfavorable product mix and the impact of higher employee-related costs in the U.S. • Softworld added 50 bps to the total company GP rate as it delivers higher margins from specialty services • Permanent placement fees increased as customers accelerated permanent hiring activity and due to the Q4 2020 acquisition of Greenwood/Asher & Associates • Professional & Industrial was impacted by unfavorable product mix as staffing services grew more quickly than outcome-based services, higher costs in outcome-based services and the impact of higher employee-related costs
$193 $220 $160 $170 $180 $190 $200 $210 $220 $230 $240 Q3 2020 SG&A Customer Dispute Charge Operating Segments Softworld Earnout Adjustment FX Q3 2021 SG&A THIRD QUARTER 2021 SG&A $ in millions | 8 • Customer dispute charge was a Q3 2020 charge related to a former customer in Mexico • Expenses in the Operating Segments, excluding Softworld, increased primarily as a result of the cessation of temporary expense mitigation actions that were enacted at the onset of COVID-19 in 2020 and from higher performance-based incentive compensation expenses • Softworld expenses include amortization expense related to acquired intangible assets • Earnout Adjustment relates to contingent consideration due to the former owners of Greenwood/Asher & Associates, which was acquired in Q4 2020 (1)Excludes 2021 results of Softworld, which was acquired as of April 5, 2021, and was included in the reported results of operations in Science, Engineering & Technology from the date of acquisition. $10 $24 $1$2 (1) ($10)
THIRD QUARTER 2021 REVENUE & GROSS PROFIT MIX | 9 GROSS PROFIT MIX BY SEGMENTREVENUE MIX BY SEGMENT Professional & Industrial Science, Engineering & Technology Education Outsourcing & Consulting International 38% 26% 6% 9% 21% 34% 30% 4% 16% 16%
THIRD QUARTER 2021 EPS SUMMARY $ in millions except per share data | 10 (1)Gain on investment in Persol Holdings of $35.5 million, $24.6 million net of tax or $0.62 per share in Q3 2021 and gain on investment in Persol Holdings of $16.8 million, $11.6 million net of tax or $0.29 per share in Q3 2020. (2)Loss on sale of assets of $0.1 million, $0.1 million, net of tax or $0.00 per share in Q3 2020. (3)Customer dispute charge related to Mexico of $9.5 million, $6.7 million net of tax or $0.17 per share in Q3 2020. (4)Restructuring accrual adjustments of $0.1 million, $0.1 million net of tax or $0.00 per share in Q3 2021 and Q3 2020. Amount Per Share Amount Per Share Net earnings (loss) $34.8 $0.87 $16.7 $0.42 (Gain) loss on investment in Persol Holdings, net of taxes(1) (24.6) (0.62) (11.6) (0.29) (Gain) loss on sale of assets, net of taxes(2) - - 0.1 - Customer dispute, net of taxes(3) - - 6.7 0.17 Restructuring charges, net of taxes(4) (0.1) - (0.1) - Adjusted net earnings $10.1 $0.25 $11.8 $0.29 Third Quarter 2021 2020
THIRD QUARTER 2021 BALANCE SHEET DATA $ in millions | 11 • Accounts Receivable reflects DSO of 63 days, up 2 days from a year ago and down 1 day from Q4 2020 • Cash of $43 million net of $0 short-term borrowings decreased from Q4 2020 as a result of cash paid upon the acquisition of Softworld during the second quarter of 2021 ‒ U.S. credit facilities include a $200 million revolving credit facility and a $150 million securitization facility ACCOUNTS RECEIVABLE CASH, NET OF SHORT-TERM BORROWINGS $248 $223 $43 $0 $50 $100 $150 $200 $250 $300 Q3 2020 Q4 2020 Q3 2021 $1,111 $1,265 $1,424 $500 $700 $900 $1,100 $1,300 $1,500 Q3 2020 Q4 2020 Q3 2021
OUTLOOK – FULL YEAR 2021 | 12 Revenue • Up 9.5% to 10.5% YOY ‒ Includes 210 to 230 from Softworld acquisition ‒ In nominal currency GP Rate • 18.5% rate expected to be favorable to pre-COVID margins ‒ Includes 30 bps impact from Softworld acquisition ‒ Favorable impact of higher fee-based business and slower recovery of lower margin specialties ‒ 2020 results include favorable impact of 20 bps from COVID related wage subsidies SG&A • Up 10% to 11% ‒ Includes costs savings from 2020 restructuring actions ‒ Reflects organic investment in SET, Education and OCG specialty growth Tax Rate • Effective rate in the mid-teens ‒ Includes impact of Work Opportunity Credit which has been extended through 2025
RECENT ACQUISITIONS | 13 • Softworld is a leading technology staffing and workforce solutions firm that serves clients across several end-markets, including financial services, life sciences, aerospace, defense, insurance, retail, and IT consulting ‒ Softworld has been included on Staffing Industry Analysts’ list of the fastest growing staffing firms in the United States for each of the past five years • In 2021, the market for temporary information technology staffing in the U.S. is projected to reach $34.0 billion, making it the largest professional staffing segment(1) (1)Staffing Industry Analysts U.S. Staffing Industry Forecast | September 7, 2021
| 14 OUR OPERATING MODEL ALIGNS TO THESE SPECIALTIES. We have redesigned our operating model to drive profitable growth in our chosen specialties. Revenue $1.9B $1.0B(1) $0.3B(2) $0.4B $1.0B GP Rate 17.8% 20.5%(1) 14.7% 33.0% 12.7% Geographic Span North America North America U.S. Global EMEA & Mexico Specialties ‒ Industrial ‒ Contact Center ‒ Office ‒ Professional ‒ Engineering ‒ Science & Clinical ‒ IT ‒ Telecom ‒ K-12 ‒ Early Childhood ‒ Higher Ed ‒ Special Needs ‒ MSP(3) ‒ RPO(3) ‒ PPO(3) ‒ Consulting ‒ EMEA Regional Life Sciences ‒ Local Niches Kelly size and margin profiles are based on 2020 full year results. (1)Kelly SET revenue and GP rate was $1.1B and 22.0%, respectively, including the results of Softworld on a pro forma basis. (2)Kelly Education revenue was $0.5B prior to COVID-19 pandemic disruption in 2019, including the results of Insight on a pro forma basis. (3)Managed Service Provider (“MSP”); Recruitment Process Outsourcing (“RPO”); Professional Payroll Outsourcing (“PPO”) KellyInternational
OUR M&A ACTIVITIES ARE SHIFTING OUR PORTFOLIO. 2017 Kelly acquires Teachers On Call 2018 Kelly sells Kelly Healthcare Resources to InGenesis Kelly sells Kelly Legal Managed Services to Trustpoint.One 2019 Kelly acquires NextGen Global Resources Kelly announces sale/leaseback of HQ real estate Kelly acquires Global Technology Associates Kelly acquires Insight 2020 Kelly sells Brazil staffing operations Kelly acquires Greenwood/ Asher & Associates Kelly acquires Softworld 2021 | 15