Kelly Services Inc 10-Q for FY2023 Q3

Kelly Services Inc (KELYA)

10-Q 2023-11-09 For: 2023-10-01

Added on April 10, 2026

About this 10-Q

Kelly Services Inc filed this 10-Q on November 9, 2023, covering the quarter ended October 1, 2023 (FY2023 Q3).

Headline figures

Quarter ended October 1, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.12B; down 4.3% from $1.17B a year earlier
Net income: $6.6M; compared with a net loss of $16.2M a year earlier
Diluted EPS: $0.18; compared with -$0.43 a year earlier

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Delaware						38-1510762
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbols	Name of each exchange on which registered
Class A Common	KELYA	NASDAQ Global Market
Class B Common	KELYB	NASDAQ Global Market


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


			Page Number

PART I. FINANCIAL INFORMATION			4

Item 1. Financial Statements (unaudited).			4

Consolidated Statements of Earnings			4

Consolidated Statements of Comprehensive Income (Loss)			5

Consolidated Balance Sheets			6

Consolidated Statements of Stockholders' Equity			8

Consolidated Statements of Cash Flows			9

Notes to Consolidated Financial Statements			11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			31

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			47

Item 4. Controls and Procedures.			47

PART II. OTHER INFORMATION			48

Item 1. Legal Proceedings.			48

Item 1A. Risk Factors.			48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			49

Item 3. Defaults Upon Senior Securities.			49

Item 4. Mine Safety Disclosures.			49

Item 5. Other Information.			49

Item 6. Exhibits.			49

SIGNATURES			51


	13 Weeks Ended				39 Weeks Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Revenue from services	$	1,118.0	$	1,167.9	$	3,603.5	$	3,731.6

Cost of services	889.5		927.3		2,880.3		2,970.0

Gross profit	228.5		240.6		723.2		761.6

Selling, general and administrative expenses	228.4		231.1		703.8		707.3

Asset impairment charge	—		—		2.4		—

Goodwill impairment charge	—		30.7		—		30.7

Loss on disposal	—		0.2		—		18.7

Gain on sale of assets	—		—		—		(5.3)

Earnings (loss) from operations	0.1		(21.4)		17.0		10.2

Loss on investment in Persol Holdings	—		—		—		(67.2)

Loss on currency translation from liquidation of subsidiary	—		—		—		(20.4)

Other income (expense), net	1.6		0.2		3.0		1.9

Earnings (loss) before taxes and equity in net earnings of affiliate	1.7		(21.2)		20.0		(75.5)

Income tax expense (benefit)	(4.9)		(5.0)		(5.0)		(13.1)

Net earnings (loss) before equity in net earnings of affiliate	6.6		(16.2)		25.0		(62.4)

Equity in net earnings of affiliate	—		—		—		0.8

Net earnings (loss)	$	6.6	$	(16.2)	$	25.0	$	(61.6)

Basic earnings (loss) per share	$	0.18	$	(0.43)	$	0.68	$	(1.62)
Diluted earnings (loss) per share	$	0.18	$	(0.43)	$	0.67	$	(1.62)

Average shares outstanding (millions):
Basic	35.4		37.9		36.2		38.2
Diluted	35.8		37.9		36.5		38.2


	October 1, 2023		January 1, 2023
Assets
Current Assets
Cash and equivalents	$	117.2	$	153.7
Trade accounts receivable, less allowances of $11.1 and $11.2 respectively	1,388.2		1,491.6
Prepaid expenses and other current assets	86.1		69.9

Total current assets	1,591.5		1,715.2

Noncurrent Assets
Property and equipment:
Property and equipment	167.0		166.8
Accumulated depreciation	(138.2)		(139.0)
Net property and equipment	28.8		27.8
Operating lease right-of-use assets	59.9		66.8
Deferred taxes	315.3		299.7
Goodwill, net	151.1		151.1


Other assets	403.4		403.2
Total noncurrent assets	958.5		948.6

Total Assets	$	2,550.0	$	2,663.8


	October 1, 2023		January 1, 2023
Liabilities and Stockholders’ Equity
Current Liabilities
Short-term borrowings	$	—	$	0.7
Accounts payable and accrued liabilities	647.5		723.3
Operating lease liabilities	13.2		14.7
Accrued payroll and related taxes	287.8		315.8
Accrued workers’ compensation and other claims	22.8		22.9
Income and other taxes	54.0		51.4


Total current liabilities	1,025.3		1,128.8

Noncurrent Liabilities
Operating lease liabilities	51.5		55.0

Accrued workers’ compensation and other claims	40.5		40.7
Accrued retirement benefits	185.6		174.1
Other long-term liabilities	11.4		11.0
Total noncurrent liabilities	289.0		280.8

Commitments and contingencies (see Contingencies footnote)

Stockholders’ Equity
Capital stock, $1.00 par value
Class A common stock, 100.0 shares authorized; 35.2 shares issued at 2023 and 35.1 shares issued at 2022	35.2		35.1
Class B common stock, 10.0 shares authorized; 3.3 shares issued at 2023 and 3.4 shares issued at 2022	3.3		3.4
Treasury stock, at cost
Class A common stock, 3.2 shares at 2023 and 1.0 shares at 2022	(56.8)		(19.5)
Class B common stock	(0.6)		(0.6)
Paid-in capital	29.3		28.0
Earnings invested in the business	1,233.0		1,216.3
Accumulated other comprehensive income (loss)	(7.7)		(8.5)
Total stockholders’ equity	1,235.7		1,254.2

Total Liabilities and Stockholders’ Equity	$	2,550.0	$	2,663.8


	Third Quarter				September Year to Date
	2023		2022		2023		2022
Professional & Industrial
Staffing services	$	253.8	$	297.9	$	785.6	$	942.3
Permanent placement	3.1		6.1		10.9		24.0
Outcome-based services	107.6		104.6		334.8		302.4
Total Professional & Industrial	364.5		408.6		1,131.3		1,268.7

Science, Engineering & Technology
Staffing services	197.7		220.6		601.2		664.3
Permanent placement	4.3		7.1		14.1		23.6
Outcome-based services	93.7		93.6		288.2		274.8
Total Science, Engineering & Technology	295.7		321.3		903.5		962.7

Education
Staffing services	126.6		103.0		578.3		427.4
Permanent placement	1.5		1.3		5.6		5.8
Total Education	128.1		104.3		583.9		433.2

Outsourcing & Consulting
Talent solutions	114.1		118.5		342.4		352.0
Total Outsourcing & Consulting	114.1		118.5		342.4		352.0

International
Staffing services	214.5		205.8		639.3		684.7
Permanent placement	5.7		5.3		17.2		17.8
Talent solutions	0.4		4.4		1.0		13.4
Total International	220.6		215.5		657.5		715.9

Total Intersegment	(5.0)		(0.3)		(15.1)		(0.9)

Total Revenue from Services	$	1,118.0	$	1,167.9	$	3,603.5	$	3,731.6


Cash consideration paid	$	85.7
Additional consideration payable	1.1
Total consideration	$	86.8


Cash consideration paid	$	61.8
Additional consideration payable	1.1
Contingent consideration	0.6
Total consideration	$	63.5


Assets divested
Cash and equivalents	$	13.4
Trade accounts receivable, net	22.8
Prepaid expenses and other current assets	0.7
Property and equipment, net	0.7
Deferred taxes	0.4
Other assets	0.3
Assets divested	38.3

Liabilities divested
Accounts payable and accrued liabilities	(0.6)
Accrued payroll and related taxes	(7.3)
Income and other taxes	(5.7)
Liabilities divested	(13.6)

Disposal group, net	$	24.7


	As of Third Quarter-End 2023
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	45.0	$	45.0	$	—	$	—


Total assets at fair value	$	45.0	$	45.0	$	—	$	—

Brazil indemnification	$	(2.9)	$	—	$	—	$	(2.9)


Total liabilities at fair value	$	(2.9)	$	—	$	—	$	(2.9)


	As of Year-End 2022
Description	Total		Level 1		Level 2		Level 3
	(In millions of dollars)
Money market funds	$	108.3	$	108.3	$	—	$	—

Total assets at fair value	$	108.3	$	108.3	$	—	$	—

Brazil indemnification	$	(3.4)	$	—	$	—	$	(3.4)
Greenwood/Asher earnout	(3.3)		—		—		(3.3)

Total liabilities at fair value	$	(6.7)	$	—	$	—	$	(6.7)


	Third Quarter						September Year to Date
	Severance Costs		Lease Termination Costs, Transformation and Other		Total		Severance Costs		Lease Termination Costs, Transformation and Other		Total

Professional & Industrial	$	3.6	$	0.4	$	4.0	$	6.6	$	0.7	$	7.3
Science, Engineering & Technology	0.6		0.1		0.7		1.0		0.2		1.2
Education	0.6		—		0.6		1.0		—		1.0
Outsourcing & Consulting	1.8		—		1.8		2.3		—		2.3
International	—		—		—		0.6		—		0.6
Corporate	3.8		4.5		8.3		4.6		10.6		15.2
Total	$	10.4	$	5.0	$	15.4	$	16.1	$	11.5	$	27.6


	Severance Costs		Lease Termination Costs		Total

Professional & Industrial	$	0.1	$	0.2	$	0.3

Education	0.4		—		0.4
Outsourcing & Consulting	0.2		—		0.2

Corporate	0.8		—		0.8
Total	$	1.5	$	0.2	$	1.7


	39 Weeks Ended
	October 1, 2023		October 2, 2022
Cash flows from operating activities:
Net earnings (loss)	$	25.0	$	(61.6)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Asset impairment charge	2.4		—
Goodwill impairment charge	—		30.7
Deferred income taxes on goodwill impairment charge	—		(5.3)
Loss on disposal	—		18.7
Depreciation and amortization	25.6		24.7
Operating lease asset amortization	12.4		14.2
Provision for credit losses and sales allowances	1.4		1.7
Stock-based compensation	7.9		5.9
Gain on sale of equity securities	(2.0)		—
Loss on investment in Persol Holdings	—		67.2
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 of PersolKelly Asia Pacific	—		(0.8)
Other, net	0.5		3.5
Changes in operating assets and liabilities, net of acquisition	(39.8)		(220.2)
Net cash from (used in) operating activities	33.4		(111.7)

Cash flows from investing activities:
Capital expenditures	(12.4)		(5.6)
Proceeds from sale of assets	—		4.5
Acquisition of company, net of cash received	—		(143.1)
Cash disposed from sale of Russia, net of proceeds	—		(6.0)
Proceeds from company-owned life insurance	—		1.5
Proceeds from sale of Persol Holdings investment	—		196.9
Proceeds from sale of equity method investment	—		119.5

Proceeds from equity securities	2.0		—
Other investing activities	(0.4)		—
Net cash (used in) from investing activities	(10.8)		167.7

Cash flows from financing activities:
Net change in short-term borrowings	(0.7)		0.2
Financing lease payments	(1.0)		(1.2)


	39 Weeks Ended
	October 1, 2023		October 2, 2022
Reconciliation of cash, cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents	$	117.2	$	122.4

Restricted cash included in prepaid expenses and other current assets	0.9		0.8
Noncurrent assets:
Restricted cash included in other assets	8.4		7.5
Cash, cash equivalents and restricted cash at end of period	$	126.5	$	130.7


	Third Quarter				September Year to Date
	2023		2022			2023		2022
Americas
United States	$	795.5	$	861.0		$	2,647.1	$	2,746.5
Canada	50.9		43.3			142.2		122.7
Puerto Rico	26.5		28.3			81.1		84.8
Mexico	18.4		10.9			55.1		32.4

Total Americas Region	891.3		943.5			2,925.5		2,986.4

Europe
Switzerland	57.0		55.2			165.9		165.5
Portugal	48.6		41.9			142.3		125.8
France	47.0		45.8			145.0		150.8
Italy	16.1		16.4			49.5		54.3

Russia	—		5.0			—		63.4



Other	47.1		49.8			142.4		152.8
Total Europe Region	215.8		214.1			645.1		712.6







Total Asia-Pacific Region	10.9		10.3			32.9		32.6

Total Kelly Services, Inc.	$	1,118.0	$	1,167.9		$	3,603.5	$	3,731.6


	September Year to Date
	2023		2022
Allowance for credit losses:
Beginning balance	$	7.7	$	9.4
Current period provision	1.4		1.3
Currency exchange effects	0.1		(0.4)
Write-offs	(1.5)		(1.8)
Ending balance	$	7.7	$	8.5


Balance as of year-end 2022	$	0.3
Accruals	6.6






Reductions for cash payments	(1.0)
Balance as of first quarter-end 2023	5.9
Accruals	5.9
Reductions for cash payments	(3.0)
Accrual adjustments	(0.3)
Balance as of second quarter-end 2023	8.5
Accruals	15.4
Reductions for cash payments	(13.0)
Accrual adjustments and write-offs	(0.3)
Balance as of third quarter-end 2023	$	10.6


	Financial Measure Performance Shares
	Shares	Weighted Average Grant Date Fair Value
Nonvested at year-end 2022	692	$	19.41
Granted	246	15.18
Vested	(200)	18.42
Forfeited	(39)	16.88

Nonvested at third quarter-end 2023	699	$	17.48


Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (in millions of dollars)
July 3, 2023 through August 6, 2023	255,511	$	17.75	255,447	$	2.9

August 7, 2023 through September 3, 2023	182,099	17.85		159,087	$	—

September 4, 2023 through October 1, 2023	351	18.25		—	$	—

Total	437,961	$	17.79	414,534


Exhibit No.						Description
10.6						Second Amendment to Third Amended and Restated Credit Agreement, dated as of November 2, 2023.

14						Code of Business Conduct and Ethics, revised August 2023.

31.1						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

31.2						Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended.

32.1						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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			KELLY SERVICES, INC.

Date: November 9, 2023

			/s/ Olivier G. Thirot
			Olivier G. Thirot

			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)


Date: November 9, 2023

			/s/ Laura S. Lockhart
			Laura S. Lockhart

			Vice President, Corporate Controller
			and Chief Accounting Officer
			(Principal Accounting Officer)


COUNTRY	DIRECT ACCESS CODE	HOTLINE NUMBER
Australia (Optus)	1-800-551-155	877-978-0049
Australia (Telstra)	1-800-881-011	877-978-0049
Austria / Österreich	0800-200-288	877-978-0049
Belgium / België	0-800-100-10	877-978-0049
Brazil / Brasil	0800 890 0288 or 0800-8888-288	877-978-0049
China / 中国	108-888 (Beijing) or 108-11 (rest of China)	877-978-0049
Canada	N/A	877-978-0049
Denmark / Danmark	8001-0010	877-978-0049
France	0800-99-0011 or 0805-701-288	877-978-0049
Germany / Deutschland	0-800-2255-288	877-978-0049
Hong Kong / 香港	800-96-1111 (HK Telephone) or 800-93-2266 (New World Telephone)	877-978-0049
Hungary / Magyarország	06 800-01111	877-978-0049
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Japan / 日本/ Nihon	00 539-111 (KDDI); 0034-811-001 (NTT); 00-663-5111 (Softbank)	877-978-0049
Luxembourg	800 2 0111	877-978-0049
Malaysia / مليسيا	1-800-80-0011	877-978-0049
Mexico / México	01-800-288-2872	877-978-0049
Netherlands (Holland) / Nederland	0800-022-9111	877-978-0049
New Zealand	000-911	877-978-0049
Norway / Norge	800-190-11	877-978-0049
Poland / Polska	0-0-800-111-1111	877-978-0049
Portugal	800-800-128	877-978-0049
Puerto Rico	N/A	877-978-0049
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Thailand / ประเทศไทย	1-800-0001-33 or 001-999-111-11	877-978-0049
United States	N/A	877-978-0049