Kelly Reports Third-Quarter 2022 Earnings

News provided by

Kelly Services, Inc.

Nov 10, 2022, 07:30 ET

  • Q3 revenue down 2.3%; up 0.3% in constant currency
  • Q3 operating loss of $21.4 million and loss per share of $0.43 down from a year ago on a non-cash goodwill impairment charge
  • Adjusted operating earnings of $9.5 million; up 7% from a year ago or up 21% in constant currency
  • Kelly's Board of Directors approves a $50 million share repurchase plan

TROY, Mich., Nov. 10, 2022 /PRNewswire/ -- Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the third quarter of 2022.

Peter Quigley, president and chief executive officer, announced revenue for the third quarter of 2022 totaled $1.2 billion, a 2.3% decrease, or 0.3% 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 a loss from operations in the third quarter of 2022 of $21.4 million, compared to earnings of $9.0 million reported in the third quarter of 2021. The loss in the third quarter of 2022 resulted from a $30.7 million goodwill impairment charge related to RocketPower. The charge reflects the impact of increasing economic uncertainty including the sharp decline in hiring in the high-tech industry in which RocketPower specializes, as well as slowing growth in the near-term demand for recruitment process outsourcing more broadly. Excluding the impairment charge, adjusted earnings from operations were $9.5 million compared to $8.9 million in the third quarter of 2021.  Earnings improved primarily as a result of structural improvements in the business mix which resulted in higher gross profit.

Loss per share in the third quarter of 2022 was $0.43 compared to earnings per share of $0.87 in the third quarter of 2021. Included in the loss per share in the third quarter of 2022 is a $0.67 per share goodwill impairment charge, net of tax, related to RocketPower, and a $0.01 loss per share, net of tax, related to the completion of the sale of our Russian operations. Included in the third quarter of 2021 earnings per share is a $0.62 gain, net of tax, related to non-cash gains, net of tax, on Persol Holding common shares. On an adjusted basis, earnings per share were $0.25 in the third quarter of 2022, consistent with $0.25 in the corresponding quarter of 2021.

"Kelly's third-quarter performance demonstrates that our more profitable solutions are in demand and our specialty growth strategy is delivering a higher-margin, higher-value business mix even in the face of heightened uncertainty, rising interest rates, and inflationary pressures," said Quigley. "We saw solid revenue growth in our SET and Education specialties, and all five operating segments delivered GP rate growth in the quarter. While challenges precipitated the RocketPower goodwill impairment, we remain confident that with diversification and integration this acquisition will bring strategic long-term value to our business.  Finally, our planned buyback of Kelly Class A common shares highlights our flexible and balanced capital allocation strategy to maximize the return on capital and complements our organic and inorganic specialty growth strategy."

Kelly also reported that on November 9, its board of directors declared a dividend of $0.075 per share. The dividend is payable on December 7, 2022 to stockholders of record as of the close of business on November 23, 2022.

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, 2022, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 8237932#. 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 brand, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company's filings with the 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 350,000 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 2021 was $4.9 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

[email protected]

[email protected]

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 13 WEEKS ENDED OCTOBER 2, 2022 AND OCTOBER 3, 2021

(UNAUDITED)

(In millions of dollars except per share data)








%

CC %


2022

2021

Change

Change

Change












Revenue from services

$

1,167.9

$

1,195.4

$

(27.5)

(2.3)

%

0.3

%












Cost of services

927.3

966.5

(39.2)

(4.0)














Gross profit

240.6

228.9

11.7

5.1

7.6












Selling, general and administrative expenses

231.1

219.9

11.2

5.1

7.1












Goodwill impairment charge

30.7

—

30.7

NM














Loss on disposal

0.2

—

0.2

NM














Earnings (loss) from operations

(21.4)

9.0

(30.4)

NM














Gain on investment in Persol Holdings

—

35.5

(35.5)

NM














Other income (expense), net

0.2

(0.3)

0.5

156.6














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

(21.2)

44.2

(65.4)

NM














Income tax expense (benefit)

(5.0)

11.1

(16.1)

(144.6)














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

(16.2)

33.1

(49.3)

NM














Equity in net earnings (loss) of affiliate

—

1.7

(1.7)

NM














Net earnings (loss)

$

(16.2)

$

34.8

$

(51.0)

NM














Basic earnings (loss) per share

$

(0.43)

$

0.87

$

(1.30)

NM


Diluted earnings (loss) per share

$

(0.43)

$

0.87

$

(1.30)

NM


























STATISTICS:






















Permanent placement revenue (included in
revenue from services)

$

19.8

$

19.7

$

0.1

0.7

%

4.4

%












Gross profit rate

20.6

%

19.2

%

1.4

pts.















Conversion rate

(8.9)

%

3.9

%

(12.8)

pts.















Adjusted EBITDA

$

19.1

$

17.3

$

1.8




Adjusted EBITDA margin

1.6

%

1.4

%

0.2

pts.















Effective income tax rate

23.4

%

25.2

%

(1.8)

pts.















Average number of shares outstanding (millions):










     Basic

37.9

39.4






     Diluted

37.9

39.5






KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

FOR THE 39 WEEKS ENDED OCTOBER 2, 2022 AND OCTOBER 3, 2021

(UNAUDITED)

(In millions of dollars except per share data)








%

CC %


2022

2021

Change

Change

Change












Revenue from services

$

3,731.6

$

3,659.4

$

72.2

2.0

%

4.0

%












Cost of services

2,970.0

2,986.2

(16.2)

(0.5)














Gross profit

761.6

673.2

88.4

13.1

15.1












Selling, general and administrative expenses

707.3

639.9

67.4

10.5

12.2












Goodwill impairment charge

30.7

—

30.7

NM














Loss on disposal

18.7

—

18.7

NM














Gain on sale of assets

(5.3)

—

(5.3)

NM














Earnings from operations

10.2

33.3

(23.1)

(69.4)














Gain (loss) on investment in Persol Holdings

(67.2)

71.8

(139.0)

NM














Loss on currency translation from liquidation of
subsidiary(1)

(20.4)

—

(20.4)

NM














Other income (expense), net

1.9

(4.0)

5.9

148.0














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

(75.5)

101.1

(176.6)

NM














Income tax expense (benefit)

(13.1)

19.0

(32.1)

(169.1)














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

(62.4)

82.1

(144.5)

NM














Equity in net earnings (loss) of affiliate

0.8

2.3

(1.5)

(66.8)














Net earnings (loss)

$

(61.6)

$

84.4

$

(146.0)

NM














Basic earnings (loss) per share

$

(1.62)

$

2.12

$

(3.74)

NM


Diluted earnings (loss) per share

$

(1.62)

$

2.12

$

(3.74)

NM


























STATISTICS:






















Permanent placement revenue (included in
revenue from services)

$

71.2

$

54.3

$

16.9

31.2

%

34.4

%












Gross profit rate

20.4

%

18.4

%

2.0

pts.















Conversion rate

1.3

%

4.9

%

(3.6)

pts.















Adjusted EBITDA

$

81.5

$

56.4

$

25.1




Adjusted EBITDA margin

2.2

%

1.5

%

0.7

pts.















Effective income tax rate

17.4

%

18.8

%

(1.4)

pts.















Average number of shares outstanding (millions):










     Basic

38.2

39.4






     Diluted

38.2

39.5







(1) Subsequent to the sale of the Persol Holdings investment, the Company commenced the dissolution process of the Kelly Services Japan subsidiary, which was considered substantially liquidated as of the first quarter-end 2022, resulting in the recognition of the $20.4 million loss on currency translation from liquidation of this subsidiary in the first quarter of 2022.

KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)













Third Quarter


















%

CC %


2022

2021

Change

Change

Professional & Industrial









Revenue from services

$

408.6

$

452.6

(9.7)

%

(9.4)

%

Gross profit

70.3

76.6

(8.3)

(8.0)

Total SG&A expenses

65.3

69.4

(6.0)

(5.8)

Earnings (loss) from operations

5.0

7.2

(30.7)













Gross profit rate

17.2

%

16.9

%

0.3

 pts.












Science, Engineering & Technology









Revenue from services

$

321.3

$

306.2

5.0

%

5.2

%

Gross profit

76.3

68.1

11.9

12.3

Total SG&A expenses

53.4

48.4

10.2

10.4

Earnings (loss) from operations

22.9

19.7

16.2













Gross profit rate

23.7

%

22.3

%

1.4

 pts.












Education









Revenue from services

$

104.3

$

66.6

56.6

%

56.6

%

Gross profit

16.6

10.0

65.4

65.4

Total SG&A expenses

21.4

17.0

25.6

25.6

Earnings (loss) from operations

(4.8)

(7.0)

31.8













Gross profit rate

15.9

%

15.1

%

0.8

 pts.












Outsourcing & Consulting









Revenue from services

$

118.5

$

113.4

4.5

%

5.9

%

Gross profit

44.1

37.3

18.6

21.2

Total SG&A expenses

37.7

30.7

23.4

25.6

Goodwill impairment charge

30.7

—

NM


Earnings (loss) from operations

(24.3)

6.6

NM













Gross profit rate

37.2

%

32.8

%

4.4

pts.












International









Revenue from services

$

215.5

$

256.8

(16.1)

%

(5.4)

%

Gross profit

33.3

36.9

(9.6)

2.0

Total SG&A expenses

31.4

34.5

(9.1)

1.5

Earnings (loss) from operations

1.9

2.4

(16.9)













Gross profit rate

15.5

%

14.4

%

1.1

pts.

KELLY SERVICES, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(UNAUDITED)

(In millions of dollars)













September Year to Date


















%

CC %


2022

2021

Change

Change

Professional & Industrial









Revenue from services

$

1,268.7

$

1,386.7

(8.5)

%

(8.3)

%

Gross profit

231.2

227.7

1.5

1.7

Total SG&A expenses

204.1

207.8

(1.8)

(1.7)

Earnings (loss) from operations

27.1

19.9

36.1













Gross profit rate

18.2

%

16.4

%

1.8

 pts.












Science, Engineering & Technology









Revenue from services

$

962.7

$

859.1

12.1

%

12.3

%

Gross profit

225.3

187.8

19.9

20.2

Total SG&A expenses

161.4

131.0

23.2

23.3

Earnings (loss) from operations

63.9

56.8

12.5













Gross profit rate

23.4

%

21.9

%

1.5

 pts.












Education









Revenue from services

$

433.2

$

284.1

52.5

%

52.5

%

Gross profit

69.2

44.0

57.3

57.3

Total SG&A expenses

60.4

46.5

29.9

29.9

Earnings (loss) from operations

8.8

(2.5)

NM













Gross profit rate

16.0

%

15.5

%

0.5

 pts.












Outsourcing & Consulting









Revenue from services

$

352.0

$

320.0

10.0

%

11.2

%

Gross profit

127.6

103.4

23.5

25.7

Total SG&A expenses

111.8

89.2

25.6

27.3

Goodwill impairment charge

30.7

—

NM


Earnings (loss) from operations

(14.9)

14.2

NM













Gross profit rate

36.3

%

32.3

%

4.0

pts.












International









Revenue from services

$

715.9

$

810.1

(11.6)

%

(3.5)

%

Gross profit

108.3

110.3

(1.8)

7.4

Total SG&A expenses

99.2

102.2

(3.0)

5.4

Earnings (loss) from operations

9.1

8.1

13.4













Gross profit rate

15.1

%

13.6

%

1.5

pts.

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In millions of dollars)










October 2, 2022

January 2, 2022

October 3, 2021

Current Assets






  Cash and equivalents

$

122.4

$

112.7

$

43.5

  Trade accounts receivable, less allowances of






    $12.1, $12.6, and $12.3, respectively

1,519.9

1,423.2

1,423.9

  Prepaid expenses and other current assets

83.1

52.8

71.0

Assets held for sale

4.7

—

—

Total current assets

1,730.1

1,588.7

1,538.4








Noncurrent Assets






  Property and equipment, net

24.9

35.3

36.1

  Operating lease right-of-use assets

67.3

75.8

79.3

  Deferred taxes

300.7

302.8

304.0

  Goodwill, net

161.4

114.8

114.8

  Investment in Persol Holdings

—

264.3

222.6

  Investment in equity affiliate

—

123.4

122.0

  Other assets

397.5

389.1

386.3

Total noncurrent assets

951.8

1,305.5

1,265.1








Total Assets

$

2,681.9

$

2,894.2

$

2,803.5








Current Liabilities






  Short-term borrowings

$

0.1

$

—

$

—

  Accounts payable and accrued liabilities

735.2

687.2

645.2

  Operating lease liabilities

14.4

17.5

18.4

  Accrued payroll and related taxes

321.4

318.4

334.9

  Accrued workers' compensation and other claims

24.4

20.8

21.1

  Income and other taxes

47.5

51.3

58.4

Total current liabilities

1,143.0

1,095.2

1,078.0








Noncurrent Liabilities






  Operating lease liabilities

55.6

61.4

64.1

Accrued payroll and related taxes

—

57.6

58.2

  Accrued workers' compensation and other claims

43.4

37.0

39.1

  Accrued retirement benefits

172.7

220.0

213.5

  Other long-term liabilities

14.5

86.8

76.5

Total noncurrent liabilities

286.2

462.8

451.4








Stockholders' Equity






  Common stock

38.5

40.1

40.1

  Treasury stock

(12.4)

(15.1)

(15.2)

  Paid-in capital

26.6

23.9

23.2

  Earnings invested in the business

1,220.1

1,315.0

1,245.3

  Accumulated other comprehensive income (loss)

(20.1)

(27.7)

(19.3)

Total stockholders' equity

1,252.7

1,336.2

1,274.1








Total Liabilities and Stockholders' Equity

$

2,681.9

$

2,894.2

$

2,803.5








STATISTICS:






 Working Capital

$

587.1

$

493.5

$

460.4

 Current Ratio

1.5

1.5

1.4

 Debt-to-capital %

0.0

%

0.0

%

0.0

%

 Global Days Sales Outstanding

64

60

63

 Year-to-Date Free Cash Flow

$

(117.3)

$

73.8

$

23.5

KELLY SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE 39 WEEKS ENDED OCTOBER 2, 2022 AND OCTOBER 3, 2021

(UNAUDITED)

(In millions of dollars)


2022

2021

Cash flows from operating activities:



Net earnings (loss)

$

(61.6)

$

84.4

Adjustments to reconcile net earnings (loss) to net cash from operating activities:



Goodwill impairment charge

30.7

—

Deferred income taxes on goodwill impairment charge

(5.3)

—

Loss on disposal

18.7

—

Depreciation and amortization

24.7

22.0

Operating lease asset amortization

14.2

16.0

Provision for credit losses and sales allowances

1.7

0.8

Stock-based compensation

5.9

4.0

(Gain) loss on investment in Persol Holdings

67.2

(71.8)

Loss on currency translation from liquidation of subsidiary

20.4

—

Gain on foreign currency remeasurement

(5.5)

—

Gain on sale of assets

(5.3)

—

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

(0.8)

(2.3)

Other, net

3.5

4.6

Changes in operating assets and liabilities, net of acquisitions

(220.2)

(26.7)

Net cash (used in) from operating activities

(111.7)

31.0





Cash flows from investing activities:



Capital expenditures

(5.6)

(7.5)

Proceeds from sale of assets

4.5

—

Acquisition of companies, net of cash received

(143.1)

(213.0)

Cash disposed from sale of Russia, net of proceeds

(6.0)

—

Proceeds from company-owned life insurance

1.5

10.4

Proceeds from sale of Persol Holdings investment

196.9

—

Proceeds from sale of equity method investment

119.5

—

Proceeds related to loans with equity affiliate

—

5.8

Proceeds from equity securities

—

5.0

Other investing activities

—

0.9

Net cash from (used in) investing activities

167.7

(198.4)





Cash flows from financing activities:



Net change in short-term borrowings

0.2

(0.2)

Financing lease payments

(1.2)

(1.3)

Dividend payments

(7.7)

(2.0)

Payments of tax withholding for stock awards

(0.9)

(0.6)

Buyback of common shares

(27.2)

—

Contingent consideration payments

(0.7)

(1.6)

  Other financing activities

0.1

—

Net cash used in financing activities

(37.4)

(5.7)





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

(7.4)

(3.9)





Net change in cash, cash equivalents and restricted cash

11.2

(177.0)

Cash, cash equivalents and restricted cash at beginning of period

119.5

228.1





Cash, cash equivalents and restricted cash at end of period

$

130.7

$

51.1

KELLY SERVICES, INC. AND SUBSIDIARIES

REVENUE FROM SERVICES BY GEOGRAPHY

(UNAUDITED)

(In millions of dollars)












Third Quarter
















%

CC %


2022

2021

Change

Change










Americas








United States

$

861.0

$

851.7

1.1

%

1.1

%

Canada

43.3

43.3

0.1

3.8

Puerto Rico

28.3

25.5

10.8

10.8

Mexico

10.9

14.4

(24.0)

(23.3)

Total Americas Region

943.5

934.9

0.9

1.1










Europe








Switzerland

55.2

54.5

1.2

6.5

France

45.8

56.3

(18.7)

(4.8)

Portugal

41.9

36.6

14.2

33.8

Italy

16.4

18.5

(10.8)

4.5

United Kingdom

14.2

17.2

(17.1)

(3.1)

Russia

5.0

33.0

(85.0)

(87.9)

Other

35.6

33.7

6.0

25.3

Total Europe Region

214.1

249.8

(14.3)

(2.8)










Total Asia-Pacific Region

10.3

10.7

(3.8)

2.9










Total Kelly Services, Inc.

$

1,167.9

$

1,195.4

(2.3)

%

0.3

%

KELLY SERVICES, INC. AND SUBSIDIARIES

REVENUE FROM SERVICES BY GEOGRAPHY

(UNAUDITED)

(In millions of dollars)












September Year to Date
















%

CC %


2022

2021

Change

Change










Americas








United States

$

2,746.5

$

2,604.8

5.4

%

5.4

%

Canada

122.7

116.9

5.0

7.8

Puerto Rico

84.8

76.6

10.7

10.7

Mexico

32.4

82.1

(60.5)

(60.3)

Total Americas Region

2,986.4

2,880.4

3.7

3.8










Europe










Switzerland

165.5

161.2

2.6

7.2

France

150.8

168.1

(10.3)

0.8

Portugal

125.8

120.9

4.0

17.1

Russia

63.4

99.3

(36.2)

(35.5)

Italy

54.3

56.0

(3.0)

9.1

United Kingdom

45.2

51.9

(12.8)

(3.7)

Other

107.6

93.3

15.4

30.8

Total Europe Region

712.6

750.7

(5.1)

4.0










Total Asia-Pacific Region

32.6

28.3

15.2

22.0










Total Kelly Services, Inc.

$

3,731.6

$

3,659.4

2.0

%

4.0

%

 KELLY SERVICES, INC. AND SUBSIDIARIES

 RECONCILIATION OF NON-GAAP MEASURES

THIRD QUARTER

 (UNAUDITED)

 (In millions of dollars)




2022

2021

SG&A Expenses:

As Reported

Adjusted

Professional & Industrial

$                    65.3

$                    69.4

Science, Engineering & Technology

53.4

48.4

Education

21.4

17.0

Outsourcing & Consulting

37.7

30.7

International

31.4

34.5

Corporate

21.9

20.0

Total Company

$                  231.1

$                  220.0

2022

2021

Earnings (loss) from Operations:

As Reported

Loss on

disposal(4)

Goodwill
impairment
charge(5)

Adjusted

Adjusted

Professional & Industrial

$                   5.0

$                    —

$                    —

$                   5.0

$                   7.2

Science, Engineering & Technology

22.9

—

—

22.9

19.7

Education

(4.8)

—

—

(4.8)

(7.0)

Outsourcing & Consulting

(24.3)

—

30.7

6.4

6.6

International

1.9

—

—

1.9

2.4

Corporate

(21.9)

—

—

(21.9)

(20.0)

Loss on disposal

(0.2)

0.2

—

—

—

Total Company

$               (21.4)

$                   0.2

$                 30.7

$                   9.5

$                   8.9

KELLY SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

THIRD QUARTER

(UNAUDITED)

(In millions of dollars)







2021

SG&A Expenses:

As Reported

Restructuring(6)

Adjusted

Professional & Industrial

$                    69.4

$                       —

$                    69.4

Science, Engineering & Technology

48.4

—

48.4

Education

17.0

—

17.0

Outsourcing & Consulting

30.7

—

30.7

International

34.5

—

34.5

Corporate

19.9

0.1

20.0

Total Company

$                  219.9

$                      0.1

$                  220.0


2021

Earnings (loss) from Operations:

As Reported

Restructuring(6)

Adjusted

Professional & Industrial

$                      7.2

$                       —

$                      7.2

Science, Engineering & Technology

19.7

—

19.7

Education

(7.0)

—

(7.0)

Outsourcing & Consulting

6.6

—

6.6

International

2.4

—

2.4

Corporate

(19.9)

(0.1)

(20.0)

Total Company

$                      9.0

$                     (0.1)

$                      8.9

KELLY SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

SEPTEMBER YEAR TO DATE

(UNAUDITED)

(In millions of dollars)





2022

2021

SG&A Expenses:

As Reported

Adjusted

Professional & Industrial

$                  204.1

$                  207.8

Science, Engineering & Technology

161.4

131.0

Education

60.4

46.5

Outsourcing & Consulting

111.8

89.2

International

99.2

102.2

Corporate

70.4

63.3

Intersegment

—

Total Company

$                  707.3

$                  640.0

2022

2021

Earnings (loss) from Operations:

As Reported

Gain on
sale

of assets(3)

Loss on
disposal(4)

Goodwill
impairment
charge(5)

Adjusted

Adjusted

Professional & Industrial

$            27.1

$               —

$               —

$               —

$            27.1

$            19.9

Science, Engineering & Technology

63.9

—

—

—

63.9

56.8

Education

8.8

—

—

—

8.8

(2.5)

Outsourcing & Consulting

(14.9)

—

—

30.7

15.8

14.2

International

9.1

—

—

—

9.1

8.1

Corporate

(70.4)

—

—

—

(70.4)

(63.3)

Loss on disposal

(18.7)

—

18.7

—

—

—

Gain on sale of assets

5.3

(5.3)

—

—

—

—

Total Company

$            10.2

$             (5.3)

$           18.7

$            30.7

$            54.3

$            33.2

KELLY SERVICES, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

SEPTEMBER YEAR TO DATE

(UNAUDITED)

(In millions of dollars)







2021

SG&A Expenses:

As Reported

Restructuring(6)

Adjusted

Professional & Industrial

$                  207.8

$                       —

$                  207.8

Science, Engineering & Technology

131.0

—

131.0

Education

46.5

—

46.5

Outsourcing & Consulting

89.2

—

89.2

International

102.2

—

102.2

Corporate

63.2

0.1

63.3

Total Company

$                  639.9

$                      0.1

$                  640.0



2021

Earnings (loss) from Operations:

As Reported

Restructuring(6)

Adjusted

Professional & Industrial

$                    19.9

$                       —

$                    19.9

Science, Engineering & Technology

56.8

—

56.8

Education

(2.5)

—

(2.5)

Outsourcing & Consulting

14.2

—

14.2

International

8.1

—

8.1

Corporate

(63.2)

(0.1)

(63.3)

Total Company

$                    33.3

$                     (0.1)

$                    33.2

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


2022

2021

2022

2021

Income tax expense (benefit)

$                     (5.0)

$                    11.1

$                  (13.1)

$                    19.0

Taxes on investment in Persol Holdings(1)

—

(10.9)

18.4

(22.0)

Taxes on foreign currency matters(2)

—

—

(1.5)

—

Taxes on gain on sale of assets(3)

—

—

(1.3)

—

Taxes on loss on disposal(4)

—

—

—

—

Taxes on goodwill impairment charge(5)

5.3

—

5.3

—

Taxes on restructuring charges(6)

—

—

—

—

Adjusted income tax expense (benefit)

$                      0.3

$                      0.2

$                      7.8

$                     (3.0)











Third Quarter

September Year to Date


2022

2021

2022

2021

Net earnings (loss)

$                  (16.2)

$                    34.8

$                  (61.6)

$                    84.4

(Gain) loss on investment in Persol Holdings,
net of taxes(1)

—

(24.6)

48.8

(49.8)

Loss on foreign currency matters, net of taxes(2)

—

—

16.4

—

Gain on sale of assets, net of taxes(3)

—

—

(4.0)

—

Loss on disposal, net of taxes(4)

0.2

—

18.7

—

Goodwill impairment charge, net of taxes(5)

25.4

—

25.4

—

Restructuring charges, net of taxes(6)

—

(0.1)

—

(0.1)

Adjusted net earnings

$                      9.4

$                    10.1

$                    43.7

$                    34.5











Third Quarter

September Year to Date


2022

2021

2022

2021


Per Share

Per Share

Net earnings (loss)

$                  (0.43)

$                    0.87

$                  (1.62)

$                    2.12

(Gain) loss on investment in Persol Holdings,
net of taxes(1)

—

(0.62)

1.28

(1.25)

Loss on foreign currency matters, net of taxes(2)

—

—

0.43

—

Gain on sale of assets, net of taxes(3)

—

—

(0.10)

—

Loss on disposal, net of taxes(4)

0.01

—

0.49

—

Goodwill impairment charge, net of taxes(5)

0.67

—

0.67

—

Restructuring charges, net of taxes(6)

—

—

—

—

Adjusted net earnings

$                    0.25

$                    0.25

$                    1.15

$                    0.86

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

2022

2021

2022

2021

Net earnings (loss)

$              (16.2)

$                34.8

$              (61.6)

$                84.4

Other (income) expense, net(2)

(0.2)

0.3

(1.9)

4.0

Income tax expense (benefit)

(5.0)

11.1

(13.1)

19.0

Depreciation and amortization

9.6

8.4

27.2

23.2

EBITDA

(11.8)

54.6

(49.4)

130.6

Equity in net (earnings) loss of affiliate

—

(1.7)

(0.8)

(2.3)

(Gain) loss on investment in Persol Holdings(1)

—

(35.5)

67.2

(71.8)

Loss on foreign currency matters(2)

—

—

20.4

—

Gain on sale of assets(3)

—

—

(5.3)

—

Loss on disposal(4)

0.2

—

18.7

—

Goodwill impairment charge(5)

30.7

—

30.7

—

Restructuring(6)

—

(0.1)

—

(0.1)

Adjusted EBITDA

$                19.1

$                17.3

$                81.5

$                56.4

Adjusted EBITDA margin

1.6 %

1.4 %

2.2 %

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 2022 sale of the Persol Holdings investment, the 2022 and 2021 gains and losses on the fair value changes of the investment in Persol Holdings, the 2022 losses on foreign currency matters, the 2022 gains on sale of assets, the 2022 loss on disposal, the 2022 goodwill impairment and the 2021 restructuring adjustments are useful to understand the Company's fiscal 2022 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.  Management also uses year-to-date free cash flow (operating cash flows less capital expenditures) to indicate the change in cash balances arising from operating activities, net of working capital needs and expenditures on fixed assets.

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)  In 2022, the loss on the investment in Persol Holdings represents the change in fair value up until the date of the sale of the investment on February 15, 2022 as well as the loss on the sale of the investment during the period presented and the related tax benefit.  In 2021, the gain on the investment in Persol Holdings represents the change in fair value of the investment during the period presented and the related tax expense.

(2)  In 2022, the loss on foreign currency matters includes a $20.4 million loss on currency translation resulting from the substantially complete liquidation of the Company's Japan entity, partially offset by a $5.5 million foreign exchange gain on the Japan entity's USD-denominated cash balance.  The foreign exchange gain is included in other (income) expense, net in the EBITDA calculation.

(3)  Gain on sale of assets in 2022 is related to the sale of under-utilized real property in the second quarter of 2022 and other real property sold in the first quarter of 2022.

(4)  Loss on disposal in 2022 represents the write-off of the net assets of our Russian operations that were sold in the third quarter of 2022.

(5) Goodwill impairment charge in 2022 is the result of an interim impairment test the Company performed related to RocketPower due to a triggering event caused by changes in market conditions.

(6)  Restructuring in 2021 represents adjustments to restructuring charges from 2020 relating to the severance costs and lease terminations for the new operating model adopted in the third quarter of 2020.

 

SOURCE Kelly Services, Inc.

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