Kelly Services Q2 2024 Revenue Declines

TL;DR

Kelly Services revenue down to $7.9B for H1 2024 from $10.9B last year. Watch closely.

AI Summary

Kelly Services Inc. reported its Q2 2024 results, with revenue for the six months ending June 30, 2024, showing a slight decrease compared to the same period in 2023. The company's financial statements indicate a total revenue of $7.9 billion for the six months ending June 30, 2024, down from $10.9 billion in the prior year. The filing also details share information for both Class A and Class B common stock.

Why It Matters

This filing provides insight into Kelly Services' recent financial performance, indicating a revenue decrease which could impact investor confidence and future strategic decisions.

Risk Assessment

Risk Level: medium — Revenue decline suggests potential market challenges or operational issues impacting the company's top line.

Key Numbers

• $7.9B — Revenue (YTD) (Revenue for the first six months of 2024.)
• $10.9B — Revenue (Prior YTD) (Revenue for the first six months of 2023.)

Key Players & Entities

• KELLY SERVICES INC (company) — Filer
• 20240630 (date) — Reporting Period End Date
• $7.9 billion (dollar_amount) — Revenue for the six months ending June 30, 2024
• $10.9 billion (dollar_amount) — Revenue for the six months ending June 30, 2023

FAQ

Key Financial Figures

• $0 — tion adjustments, net of tax expense of $0.0, tax benefit of $0.1, tax expense of
• $0.0 — .0, tax benefit of $0.1, tax expense of $0.0 and tax benefit of $0.1, respectively (
• $0.4 — lity adjustments, net of tax benefit of $0.4 — — — — Less: Reclassification adjustm
• $7.9 — accounts receivable, less allowances of $7.9 and $10.9, respectively 1,193.9 1,160.6
• $10 — receivable, less allowances of $7.9 and $10.9, respectively 1,193.9 1,160.6 Prepai
• $1.00 — Stockholders' Equity Capital stock, $1.00 par value Class A common stock, 100.0

Filing Documents

• kelya-20240630.htm (10-Q) — 1580KB
• a20240630-10xqxexh22amende.htm (EX-2.2) — 918KB
• a20240630-10qxexh311.htm (EX-31.1) — 10KB
• a20240630-10qxexh312.htm (EX-31.2) — 10KB
• a20240630-10qxexh321.htm (EX-32.1) — 5KB
• a20240630-10qxexh322.htm (EX-32.2) — 6KB
• 0000055135-24-000031.txt ( ) — 10230KB
• kelya-20240630.xsd (EX-101.SCH) — 56KB
• kelya-20240630_cal.xml (EX-101.CAL) — 99KB
• kelya-20240630_def.xml (EX-101.DEF) — 360KB
• kelya-20240630_lab.xml (EX-101.LAB) — 700KB
• kelya-20240630_pre.xml (EX-101.PRE) — 549KB
• kelya-20240630_htm.xml (XML) — 1553KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 4

Financial Statements (unaudited)

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

Notes to Consolidated Financial Statements 11

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . 32

Quantitative and Qualitative Disclosures About Market Risk

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

Controls and Procedures

Item 4. Controls and Procedures . 47

OTHER INFORMATION

PART II. OTHER INFORMATION 48

Legal Proceedings

Item 1. Legal Proceedings . 48

Risk Factors

Item 1A. Risk Factors . 48

Unregistered Sales of Equity Securities and Use of Proceeds

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

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities . 49

Mine Safety Disclosures

Item 4. Mine Safety Disclosures . 49

Other Information

Item 5. Other Information . 49

Exhibits

Item 6. Exhibits . 49

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. KELLY SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (In millions of dollars except per share data) 13 Weeks Ended 26 Weeks Ended June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023 Revenue from services $ 1,057.5 $ 1,217.2 $ 2,102.6 $ 2,485.5 Cost of services 843.8 976.6 1,683.2 1,990.8 Gross profit 213.7 240.6 419.4 494.7 Selling, general and administrative expenses 191.5 232.0 382.0 475.4 Asset impairment charge 5.5 2.4 5.5 2.4 (Gain) loss on sale of EMEA staffing operations 10.0 — ( 1.6 ) — Gain on sale of assets ( 5.5 ) — ( 5.5 ) — Earnings from operations 12.2 6.2 39.0 16.9 Gain on forward contract — — 1.2 — Other income (expense), net ( 6.5 ) ( 0.6 ) ( 4.7 ) 1.4 Earnings before taxes 5.7 5.6 35.5 18.3 Income tax expense (benefit) 1.1 ( 1.9 ) 5.1 ( 0.1 ) Net earnings $ 4.6 $ 7.5 $ 30.4 $ 18.4 Basic earnings per share $ 0.13 $ 0.20 $ 0.84 $ 0.49 Diluted earnings per share $ 0.12 $ 0.20 $ 0.83 $ 0.49 Average shares outstanding (millions): Basic 35.5 36.0 35.5 36.5 Diluted 35.9 36.4 35.9 36.9 See accompanying unaudited Notes to Consolidated Financial Statements. 4 KELLY SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (In millions of dollars) 13 Weeks Ended 26 Weeks Ended June 30, 2024 July 2, 2023 June 30, 2024 July 2, 2023 Net earnings $ 4.6 $ 7.5 $ 30.4 $ 18.4 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments, net of tax expense of $0.0, tax benefit of $0.1, tax expense of $0.0 and tax benefit of $0.1, respectively ( 2.0 ) 2.8 ( 2.5 ) 5.1 Less: Reclassification adjustments included in net earnings — — ( 0.6 ) — Foreign currency translation adjustments ( 2.0 ) 2.8 ( 3.1 ) 5.1 Pension liability adjustments, net of tax benefit of $0.4 — — — — Less: Reclassification adjustments included in net earnings — — 0.4 — Pension liability adjustments — — 0.4 —

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The accompanying unaudited consolidated financial statements of Kelly Services, Inc. (the "Company," "Kelly," "we" or "us") have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the fiscal year ended December 31, 2023, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2024 (the 2023 consolidated financial statements). There were no changes in accounting policies as disclosed in the Form 10-K. The Company's second fiscal quarter ended on June 30, 2024 and July 2, 2023, each of which contained 13 weeks. The corresponding June year-to-date periods for 2024 and 2023 each contained 26 weeks. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation. Specifically, as discussed in the Segment Disclosures footnote, the Company has made a change to its reportable segments during the first quarter of 2024. We have also reclassified the presentation of our retirement plan assets, which represents our investment in life insurance contracts, and intangibles, net from the other assets line item to separate line items within our consolidated balance sheet. 11 KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) 2. Revenue Revenue Disaggregated by Service Type In 2024, Kelly has four operating segments: Professional & Industrial ("P&I"), Science, Engineering & Technology ("SET"), Education, and Outsourcing & Consulting Group ("Outsourcing & Consulting," "OCG"). Prior to 2024, the Company also had an International operating segment (see Segment Disclosures footnote). Following the sale of the Company's EMEA staffing operations in January 2024 (see Acquisition and Disposition footnote), the Mexico operations, which were previously in our International segment, are now included in our P&I segment. The 2023 P&I segment information has been recast to conform to the new structure. Other than OCG, each segment delivers talent through staffing services, permanent placement or outcome-based services. Our OCG and SET segments, following the acquisition of Motion Recruitment Partners, LLC which is included in the SET segment (see Acquisition and Disposition footnote), deliver talent solutions including managed service provider ("MSP"), payroll process outsourcing ("PPO"), recruitment process outsourcing ("RPO"), and talent advisory services. The following table presents our segment revenues disaggregated by service type (in millions of dollars): Second Quarter June Year to Date 2024 2023 2024 2023 Professional & Industrial Staffing services $ 233.3 $ 255.3 $ 464.5 $ 523.9 Permanent placement 2.3 3.7 5.0 8.3 Outcome-based services 122.1 131.8 246.6 261.2 Total Professional & Industrial 357.7 390.8 716.1 793.4 Science, Engineering & Technology Staffing services 219.2 201.2 414.4 403.5 Permanent placement 5.8 4.3 10.0 9.8 Outcome-based services 103.2 95.9 193.1 194.5 Talent solutions 4.0 — 4.0 — Total Science, Engineering & Technology 332.2 301.4 621.5 607.8 Education Staffing services 248.5 204.1 537.3 451.7 Permanent placement 2.6 2.3 3.7 4.1 Total Education 251.1 206.4 541.0 455.8 Outsourc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) Revenue Disaggregated by Geography Our operations are subject to different economic and regulatory environments depending on geographic location. Our P&I and Education segments operate in the Americas region, our SET segment operates in the Americas and Europe regions, and OCG operates in the Americas, Europe and Asia-Pacific regions. In 2023, our International segment included our staffing operations in Europe as well as Mexico, which is included in the Americas region. The below table presents our revenues disaggregated by geography (in millions of dollars): Second Quarter June Year to Date 2024 2023 2024 2023 Americas United States $ 944.2 $ 892.4 $ 1,877.8 $ 1,851.6 Canada 46.4 46.4 91.8 91.3 Puerto Rico 28.2 27.7 53.1 54.6 Mexico 15.4 20.0 34.3 36.7 Total Americas Region 1,034.2 986.5 2,057.0 2,034.2 Europe Switzerland 1.0 56.0 2.1 108.9 France — 50.2 — 98.0 Portugal — 49.3 — 93.7 Italy — 16.5 — 33.4 Other 9.8 47.6 19.5 95.3 Total Europe Region 10.8 219.6 21.6 429.3 Total Asia-Pacific Region 12.5 11.1 24.0 22.0 Total Kelly Services, Inc. $ 1,057.5 $ 1,217.2 $ 2,102.6 $ 2,485.5 13 KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) The below table presents revenues from our SET, OCG and former International segment, which previously included our Mexico operations, disaggregated by geographic region, (in millions of dollars): Second Quarter June Year to Date 2024 2023 2024 2023 Science, Engineering & Technology Americas $ 329.4 $ 297.3 $ 615.6 $ 599.4 Europe 2.8 4.1 5.9 8.4 Total Science, Engineering & Technology $ 332.2 $ 301.4 $ 621.5 $ 607.8 Outsourcing & Consulting Americas $ 96.5 $ 93.0 $ 185.3 $ 187.1 Europe 8.0 9.6 15.7 19.2 Asia-Pacific 12.5 11.1 24.0 22.0 Total Outsourcing & Consulting $ 117.0 $ 113.7 $ 225.0 $ 228.3 International Europe $ — $ 205.9 $ — $ 401.7 Total International $ — $ 205.9 $ — $ 401.7 Deferred Costs Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $ 1.6 million as of second quarter-end 2024 and $ 3.4 million as of year-end 2023. Amortization expense for the deferred costs in the second quarter and June year-to-date 2024 was $ 1.7 million and $ 4.1 million, respectively. Amortization expense for the deferred costs in the second quarter and June year-to-date 2023 was $ 1.4 million and $ 3.8 million, respectively. 3. Credit Losses The rollforward of our allowance for credit losses related to trade accounts receivable, which is recorded in trade accounts receivable, less allowance in the consolidated balance sheet, is as follows (in millions of dollars): June Year to Date 2024 2023 Allowance for credit losses: Beginning balance $ 8.0 $ 7.7 Current period provision 0.4 0.9 Currency exchange effects ( 0.2 ) 0.2 Disposition of EMEA staffing operations ( 2.4 ) — Write-offs ( 0.6 ) ( 1.1 ) Ending balance $ 5.2 $ 7.7 Write-offs are presented net of recoveries, which were not material for second quarter-end 2024 or 2023. As of second quarter-end 2024, the Company has a receivable of $ 16.8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) 4. Acquisition and Disposition Acquisition On May 31, 2024, the Company indirectly acquired 100 % of the equity interests in Motion Recruitment Partners, LLC ("MRP") by way of a merger with MRP Merger Sub, Inc. ("Merger Sub"), a newly-formed, wholly owned subsidiary of the Company, with and into MRP Topco ("Topco"), the indirect parent company of MRP and Littlejohn Fund V, L.P. ("Littlejohn"), with Topco surviving the merger (the "Merger"). MRP is a parent company to a group of leading global talent solutions providers and the acquisition will strengthen the scale and capabilities of Kelly's solutions portfolio. Under terms of the merger agreement, the $ 425.0 million purchase price was adjusted for estimated cash held by MRP at the closing date and estimated working capital adjustments, resulting in the Company paying cash of $ 440.0 million. The acquisition was funded with cash on hand and available credit facilities (see Debt footnote). Total consideration includes $ 3.4 million of contingent consideration related to an earnout payment with a maximum potential cash payment of $ 60.0 million in the event certain financial metrics are met per the terms of the agreement. The earnout payment is based on a multiple of gross profit in excess of an agreed-upon amount during the earnout period, defined as the 12 months ending March 31, 2025, and any necessary payment is due to the seller in the second quarter of 2025. The initial fair value of the earnout was established using a Monte Carlo simulation model and will be reassessed on a quarterly basis (see Fair Value Measurements footnote). The merger agreement contains representations and warranties and covenants customary for a transaction of this nature. The total consideration is as follows (in millions of dollars): Cash consideration paid $ 425.0 Estimated cash acquired 13.6 Estimated net working capital adjustment 1.4 Total cash considerati

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) The fair value of the acquired receivables represents the contractual value net of the allowance for potentially uncollectible accounts. Included in the assets purchased in the MRP acquisition was $ 145.9 million of intangible assets, made up of $ 88.1 million in customer relationships, $ 56.5 million associated with MRP's trade names, and $ 1.3 million for non-compete agreements. The customer relationships will be amortized over 15 years with no residual value, the trade names will be amortized over 10 - 15 years with no residual value, and the non-compete agreements will be amortized over four years with no residual value. Goodwill generated from the acquisition was primarily attributable to expanding market potential and the expected revenue and operational synergies and was assigned to the SET operating segment (see Goodwill footnote). None of the goodwill generated from the acquisition is expected to be deductible for tax purposes. MRP's results of operations are included in the SET segment. For the second quarter and June year-to-date 2024, our consolidated revenues and net earnings include $ 40.0 million and $ 1.6 million from MRP, respectively. Pro Forma Information The following unaudited pro forma information presents a summary of the operating results as if the MRP acquisition had been completed as of January 2, 2023 (in millions of dollars): Second Quarter June Year to Date 2024 2023 2024 2023 Pro forma revenues $ 1,147.4 $ 1,357.5 $ 2,323.0 $ 2,769.9 Pro forma net earnings (loss) $ — $ 5.4 $ 23.2 $ 12.4 The pro forma results for the periods above include adjustments to amortization expense for the intangible assets, reversal of MRP's interest expense on credit facilities that were settled upon completion of the acquisition, interest expense and associated amortization of debt issuance costs for financing the acquisition, reclassification of transaction expenses to the app

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) The major classes of divested assets and liabilities were as follows (in millions of dollars): Assets divested Cash and equivalents $ 33.5 Trade accounts receivable, net 202.8 Prepaid expenses and other current assets 29.0 Property and equipment, net 4.2 Operating lease right-of-use assets 14.2 Deferred taxes 4.1 Other assets 5.4 Assets divested 293.2 Liabilities divested Accounts payable and accrued liabilities ( 24.5 ) Operating lease liabilities, current ( 5.7 ) Accrued payroll and related taxes ( 91.6 ) Income and other taxes ( 32.9 ) Operating lease liabilities, noncurrent ( 8.9 ) Accrued retirement benefits ( 1.7 ) Other long-term liabilities ( 4.6 ) Liabilities divested ( 169.9 ) Disposal group, net $ 123.3 17 KELLY SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) 5. Fair Value Measurements Trade accounts receivable, short-term borrowings, accounts payable, accrued liabilities and accrued payroll and related taxes approximate their fair values due to the short-term maturities of these assets and liabilities. Assets and Liabilities Measured at Fair

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