Kelly Services Q3 2024 Filing Details

TL;DR

Kelly Services Q3 2024 filing is out. Check financials for EMEA Staffing and share classes.

AI Summary

Kelly Services Inc. reported its Q3 2024 results on November 7, 2024, for the period ending September 29, 2024. The filing details financial performance across various segments and geographies, including EMEA Staffing Operations. Key financial data points such as common stock figures and share classes are provided for the reporting periods.

Why It Matters

This filing provides investors and analysts with the latest financial performance data for Kelly Services, crucial for understanding the company's operational health and future outlook.

Risk Assessment

Risk Level: low — This is a routine quarterly filing providing standard financial disclosures.

Key Numbers

• 2024 Q3 — Reporting Period (Third quarter of 2024)
• 2024-09-29 — As of Date (End of the reporting period)

Key Players & Entities

• KELLY SERVICES INC (company) — Filer
• 20240929 (date) — Reporting Period End Date
• 20241107 (date) — Filing Date
• EMEA Staffing Operations (company) — Business Segment

FAQ

Key Financial Figures

• $0 — tion adjustments, net of tax benefit of $0.1, $0.0, $0.1 and $0.1, respectively 1.
• $0.1 — ents, net of tax benefit of $0.1, $0.0, $0.1 and $0.1, respectively 1.2 ( 4.3 ) ( 1.
• $0.4 — lity adjustments, net of tax benefit of $0.4 — — — — Less: Reclassification adjustm
• $8.6 — accounts receivable, less allowances of $8.6 and $10.9, respectively 1,248.6 1,160.6
• $10 — receivable, less allowances of $8.6 and $10.9, respectively 1,248.6 1,160.6 Prepai
• $1.00 — Stockholders' Equity Capital stock, $1.00 par value Class A common stock, 100.0

Filing Documents

• kelya-20240929.htm (10-Q) — 1626KB
• a20240929-10qxexh311.htm (EX-31.1) — 10KB
• a20240929-10qxexh312.htm (EX-31.2) — 10KB
• a20240929-10qxexh321.htm (EX-32.1) — 5KB
• a20240929-10qxexh322.htm (EX-32.2) — 6KB
• 0000055135-24-000036.txt ( ) — 9498KB
• kelya-20240929.xsd (EX-101.SCH) — 58KB
• kelya-20240929_cal.xml (EX-101.CAL) — 100KB
• kelya-20240929_def.xml (EX-101.DEF) — 391KB
• kelya-20240929_lab.xml (EX-101.LAB) — 717KB
• kelya-20240929_pre.xml (EX-101.PRE) — 580KB
• kelya-20240929_htm.xml (XML) — 1598KB

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 . 48

OTHER INFORMATION

PART II. OTHER INFORMATION 49

Legal Proceedings

Item 1. Legal Proceedings . 49

Risk Factors

Item 1A. Risk Factors . 49

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . 50

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities . 50

Mine Safety Disclosures

Item 4. Mine Safety Disclosures . 50

Other Information

Item 5. Other Information . 50

Exhibits

Item 6. Exhibits . 50

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 39 Weeks Ended September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023 Revenue from services $ 1,038.1 $ 1,118.0 $ 3,140.7 $ 3,603.5 Cost of services 816.4 889.5 2,499.6 2,880.3 Gross profit 221.7 228.5 641.1 723.2 Selling, general and administrative expenses 219.0 228.4 601.0 703.8 Asset impairment charge — — 5.5 2.4 Gain on sale of EMEA staffing operations — — ( 1.6 ) — Loss (gain) on sale of assets 0.1 — ( 5.4 ) — Earnings from operations 2.6 0.1 41.6 17.0 Gain on forward contract — — 1.2 — Other income (expense), net ( 4.4 ) 1.6 ( 9.1 ) 3.0 Earnings (loss) before taxes ( 1.8 ) 1.7 33.7 20.0 Income tax expense (benefit) ( 2.6 ) ( 4.9 ) 2.5 ( 5.0 ) Net earnings $ 0.8 $ 6.6 $ 31.2 $ 25.0 Basic earnings per share $ 0.02 $ 0.18 $ 0.86 $ 0.68 Diluted earnings per share $ 0.02 $ 0.18 $ 0.85 $ 0.67 Average shares outstanding (millions): Basic 35.6 35.4 35.5 36.2 Diluted 36.0 35.8 35.9 36.5 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 39 Weeks Ended September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023 Net earnings $ 0.8 $ 6.6 $ 31.2 $ 25.0 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments, net of tax benefit of $0.1, $0.0, $0.1 and $0.1, respectively 1.2 ( 4.3 ) ( 1.3 ) 0.8 Less: Reclassification adjustments included in net earnings — — ( 0.6 ) — Foreign currency translation adjustments 1.2 ( 4.3 ) ( 1.9 ) 0.8 Pension liability adjustments, net of tax benefit of $0.4 — — — — Less: Reclassification adjustments included in net earnings — — 0.4 — Pension liability adjustments — — 0.4 — Other comprehe

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 third fiscal quarter ended on September 29, 2024 and October 1, 2023, each of which contained 13 weeks. The corresponding September year-to-date periods for 2024 and 2023 each contained 39 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): Third Quarter September Year to Date 2024 2023 2024 2023 Professional & Industrial Staffing services $ 243.5 $ 250.2 $ 708.0 $ 774.1 Permanent placement 2.6 3.4 7.6 11.7 Outcome-based services 124.3 124.4 370.9 385.6 Total Professional & Industrial 370.4 378.0 1,086.5 1,171.4 Science, Engineering & Technology Staffing services 267.0 197.7 686.2 601.2 Permanent placement 10.2 4.3 20.2 14.1 Outcome-based services 116.3 93.7 304.6 288.2 Talent solutions 11.7 — 15.7 — Total Science, Engineering & Technology 405.2 295.7 1,026.7 903.5 Education Staffing services 141.4 126.6 678.7 578.3 Permanent placement 0.7 1.5 4.4 5.6 Total Education 142.1 128.1 683.1

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 operations in Mexico, which is part of the Americas region. The below table presents our revenues disaggregated by geography (in millions of dollars): Third Quarter September Year to Date 2024 2023 2024 2023 Americas United States $ 923.6 $ 795.5 $ 2,801.4 $ 2,647.1 Canada 49.3 50.9 141.1 142.2 Puerto Rico 26.6 26.5 79.7 81.1 Mexico 12.7 18.4 47.0 55.1 Total Americas Region 1,012.2 891.3 3,069.2 2,925.5 Europe Switzerland 0.8 57.0 2.9 165.9 France 0.1 47.0 0.1 145.0 Portugal — 48.6 — 142.3 Italy — 16.1 — 49.5 Other 9.2 47.1 28.7 142.4 Total Europe Region 10.1 215.8 31.7 645.1 Total Asia-Pacific Region 15.8 10.9 39.8 32.9 Total Kelly Services, Inc. $ 1,038.1 $ 1,118.0 $ 3,140.7 $ 3,603.5 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 and OCG segments as well as our former International segment, which previously included our Mexico operations, disaggregated by geographic region, (in millions of dollars): Third Quarter September Year to Date 2024 2023 2024 2023 Science, Engineering & Technology Americas $ 402.8 $ 292.0 $ 1,018.4 $ 891.4 Europe 2.4 3.7 8.3 12.1 Total Science, Engineering & Technology $ 405.2 $ 295.7 $ 1,026.7 $ 903.5 Outsourcing & Consulting Americas $ 97.5 $ 94.1 $ 282.8 $ 281.2 Europe 7.7 9.1 23.4 28.3 Asia-Pacific 15.8 10.9 39.8 32.9 Total Outsourcing & Consulting $ 121.0 $ 114.1 $ 346.0 $ 342.4 International Europe $ — $ 203.0 $ — $ 604.7 Total International $ — $ 203.0 $ — $ 604.7 Deferred Costs Deferred fulfillment costs, which are included in prepaid expenses and other current assets in the consolidated balance sheet, were $ 2.1 million as of third quarter-end 2024 and $ 3.4 million as of year-end 2023. Amortization expense for the deferred costs in the third quarter and September year-to-date 2024 was $ 1.3 million and $ 5.4 million, respectively. Amortization expense for the deferred costs in the third quarter and September year-to-date 2023 was $ 1.7 million and $ 5.5 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): September Year to Date 2024 2023 Allowance for credit losses: Beginning balance $ 8.0 $ 7.7 Current period provision 1.0 1.4 Currency exchange effects ( 0.2 ) 0.1 Disposition of EMEA staffing operations ( 2.4 ) — Write-offs ( 0.7 ) ( 1.5 ) Ending balance $ 5.7 $ 7.7 Write-offs are presented net of recoveries, which were not material for third quarter-end 2024 or 2023. As of third quarter-end 202

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 is expected to 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 included $ 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 is reassessed on a quarterly basis (see Fair Value Measurements footnote). In the third quarter of 2024, the Company recorded a payable in accounts payable and accrued liabilities in the consolidated balance sheet for a post-close net working capital adjustment of $ 1.4 million which will be paid in the fourth quarter of 2024. The merger agreement contains representations and warrant

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in millions of dollars): Cash and equivalents $ 12.6 Trade accounts receivable 89.1 Prepaid expenses and other current assets 8.5 Net property and equipment 3.1 Operating lease right-of-use assets 11.9 Goodwill 222.9 Intangibles, net 145.9 Other assets, noncurrent 10.6 Accounts payable and accrued liabilities, current ( 12.1 ) Operating lease liabilities, current ( 4.0 ) Accrued payroll and related taxes, current ( 15.9 ) Income and other taxes, current ( 0.5 ) Operating lease liabilities, noncurrent ( 9.0 ) Other long-term liabilities ( 18.3 ) Total consideration, including working capital adjustments $ 444.8 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 are amortized over 15 years with no residual value, the trade names are amortized over 10 - 15 years with no residual value, and the non-compete agreements are 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 third quarter-end 2024, our consolidated revenues and net earnings include $ 124.6 million and $ 2.3 million from MRP, respectively. For Septemb

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (UNAUDITED) and is not necessarily indicative of the results of operations as they would have been had the acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results. Disposition of EMEA Staffing Operations On January 2, 2024, the Company completed the sale of its EMEA staffing operations ("disposal group"), which was included in the Company's International operating segment, to Gi Group Holdings S.P.A. ("Gi"). Upon closing, the Company received cash proceeds of $ 110.6 million, or $ 77.1 million net of cash disposed, which is included in investing activities in the consolidated statements of cash flows. The Company expects to receive additional net cash proceeds to reflect the cash-free, debt-free transaction basis, as well as working capital and other adjustments. The Company does not expect to receive any proceeds from the contingent consideration opportunity associated with the transaction. In the first quarter of 2024, the Company recorded a euro-denominated receivable from Gi of $ 26.9 million representing the adjustments that were determinable and expected to be received. In the second quarter of 2024, the Company recorded negative working capital and other adjustments of $ 10.1 million, which reduced the net receivable from Gi to $ 16.8 million. As of the third quarter-end 2024, the net receivable is $ 17.6 million, with the change of $ 0.8 million from the second quarter reflecting the foreign currency remeasurement. The Company is actively reconciling the receivable in accordance with the purchase agreement and expects it to be settled upon completion of this process. The receivable is included in prepaid expenses and other current assets in the consolidated balance sheet and included in the gain on the transaction. The total gain on the transaction through third quarter-end 2024 is $ 1.6 million, which is recorded in the gain on sale of EMEA staffi

View Full Filing

View this 10-Q filing on SEC EDGAR