Kelly Reports First-Quarter 2024 Earnings
Kelly reported Q1 2024 revenue of $1.05 billion, a 17.6% decrease due to sale of European staffing operations. Operating earnings were $26.8 million, up 34% on an adjusted basis. Adjusted EBITDA margin increased to 3.2%. Expect further margin expansion from acquiring MRP in Q2 2024. EPS improved to $0.70 from $0.29 in Q1 2023. Declared dividend of $0.075 per share.
Operating earnings increased by 34% on an adjusted basis in Q1 2024.
Adjusted EBITDA margin improved to 3.2% due to reduction in operating expenses and sale of European staffing operations.
Expect further margin expansion with the acquisition of Motion Recruitment Partners in Q2 2024.
Earnings per share improved to $0.70 from $0.29 in Q1 2023.
Declared a dividend of $0.075 per share.
Q1 revenue decreased by 17.6% due to the sale of European staffing operations.
Excluding the impact of the sale, revenue declined 2.6% on an organic basis.
Lower permanent placement fees resulted in lower gross profit.
Insights
- Q1 operating earnings of
$26.8 million , or up34% on an adjusted basis - Q1 revenue down following sale of European staffing operations; down
2.6% on an organic basis - Q1 adjusted EBITDA margin increased 110 basis points to
3.2% driven by meaningful reduction in operating expenses resulting from business transformation initiatives and sale of European staffing operations - Company expects further expansion of EBITDA margin from the planned Q2 2024 acquisition of Motion Recruitment Partners, LLC ("MRP") and ongoing transformation actions
TROY, Mich., May 09, 2024 (GLOBE NEWSWIRE) -- Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the first quarter of 2024.
Peter Quigley, president and chief executive officer, announced revenue for the first quarter of 2024 totaled
Kelly reported operating earnings in the first quarter of 2024 of
Earnings per share in the first quarter of 2024 were
On May 3, Kelly announced that it had entered into a definitive agreement to acquire MRP and expects the transaction to close in the second quarter of 2024.
“In the first quarter, we continued making progress on our journey to accelerate profitable growth notwithstanding continued macroeconomic uncertainty and industry headwinds. Our ongoing growth and efficiency initiatives increased Kelly’s adjusted EBITDA margin to
Kelly also reported that on May 7, its board of directors declared a dividend of
In conjunction with its first-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 May 9 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 1:30 p.m. ET on May 9, 2024, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 1646639#. 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 statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Kelly’s financial expectations, are forward-looking statements. Factors that could cause actual results to differ materially from those contained in this release include, but are not limited to, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business’s anticipated growth strategies, (vii) our future business development, results of operations and financial condition, (viii) damage to our brands, (ix) dependency on third parties for the execution of critical functions, (x) conducting business in foreign countries, including foreign currency fluctuations, (xi) availability of temporary workers with appropriate skills required by customers, (xii) cyberattacks or other breaches of network or information technology security, and (xiii) other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. All information provided in this press release is as of the date of this press release 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) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 500,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2023 was
KLYA-FIN
| ANALYST & MEDIA CONTACT: | |||
| Scott Thomas | |||
| (248) 251-7264 | |||
| scott.thomas@kellyservices.com | |||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||
| FOR THE 13 WEEKS ENDED MARCH 31, 2024 AND APRIL 2, 2023 | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| (In millions of dollars except per share data) | ||||||||||||||||
| % | CC % | |||||||||||||||
| 2024 | 2023 | Change | Change | Change | ||||||||||||
| Revenue from services | $ | 1,045.1 | $ | 1,268.3 | $ | (223.2 | ) | (17.6 | ) | % | (17.7 | ) | % | |||
| Cost of services | 839.4 | 1,014.2 | (174.8 | ) | (17.2 | ) | ||||||||||
| Gross profit | 205.7 | 254.1 | (48.4 | ) | (19.1 | ) | (19.2 | ) | ||||||||
| Selling, general and administrative expenses | 190.5 | 243.4 | (52.9 | ) | (21.7 | ) | (21.9 | ) | ||||||||
| Gain on sale of EMEA staffing operations | (11.6 | ) | — | (11.6 | ) | NM | ||||||||||
| Earnings from operations | 26.8 | 10.7 | 16.1 | 150.2 | ||||||||||||
| Gain on forward contract | 1.2 | — | 1.2 | NM | ||||||||||||
| Other income (expense), net | 1.8 | 2.0 | (0.2 | ) | (8.8 | ) | ||||||||||
| Earnings before taxes | 29.8 | 12.7 | 17.1 | 134.6 | ||||||||||||
| Income tax expense | 4.0 | 1.8 | 2.2 | 128.0 | ||||||||||||
| Net earnings | $ | 25.8 | $ | 10.9 | $ | 14.9 | 135.7 | |||||||||
| Basic earnings per share | $ | 0.71 | $ | 0.29 | $ | 0.42 | 144.8 | |||||||||
| Diluted earnings per share | $ | 0.70 | $ | 0.29 | $ | 0.41 | 141.4 | |||||||||
| STATISTICS: | ||||||||||||||||
| Permanent placement revenue (included in revenue from services) | $ | 8.0 | $ | 17.5 | $ | (9.5 | ) | (54.2 | ) | % | (54.4 | ) | % | |||
| Gross profit rate | 19.7 | % | 20.0 | % | (0.3 | ) | pts. | |||||||||
| Adjusted EBITDA | $ | 33.3 | $ | 26.8 | $ | 6.5 | ||||||||||
| Adjusted EBITDA margin | 3.2 | % | 2.1 | % | 1.1 | pts. | ||||||||||
| Effective income tax rate | 13.5 | % | 13.9 | % | (0.4 | ) | pts. | |||||||||
| Average number of shares outstanding (millions): | ||||||||||||||||
| Basic | 35.4 | 37.1 | ||||||||||||||
| Diluted | 35.8 | 37.4 | ||||||||||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||
| SEGMENT INFORMATION | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| (In millions of dollars) | ||||||||||||||
| We utilize business unit profit (loss) to evaluate the performance of our segments. Business unit profit (loss) and SG&A expenses as presented in the segment information table below do not include depreciation and amortization expenses. | ||||||||||||||
| First Quarter | ||||||||||||||
| % | CC % | |||||||||||||
| 2024 | 2023 | Change | Change | |||||||||||
| Professional & Industrial | ||||||||||||||
| Revenue from services | $ | 358.4 | $ | 402.6 | (11.0 | ) | % | (11.4 | ) | % | ||||
| Gross profit | 63.9 | 72.2 | (11.7 | ) | (12.1 | ) | ||||||||
| SG&A expenses excluding restructuring charges | 57.9 | 70.4 | (17.7 | ) | (18.0 | ) | ||||||||
| Restructuring charges | 0.1 | 3.0 | (96.6 | ) | (96.6 | ) | ||||||||
| Total SG&A expenses | 58.0 | 73.4 | (20.9 | ) | (21.3 | ) | ||||||||
| Business unit profit (loss) | 5.9 | (1.2 | ) | NM | ||||||||||
| Business unit profit (loss) excluding restructuring charges | 6.0 | 1.8 | 210.5 | |||||||||||
| Gross profit rate | 17.8 | % | 18.0 | % | (0.2 | ) | pts. | |||||||
| Science, Engineering & Technology | ||||||||||||||
| Revenue from services | $ | 289.3 | $ | 306.4 | (5.6 | ) | % | (5.6 | ) | % | ||||
| Gross profit | 64.4 | 71.3 | (9.6 | ) | (9.6 | ) | ||||||||
| Total SG&A expenses | 46.2 | 52.8 | (12.5 | ) | (12.6 | ) | ||||||||
| Business unit profit (loss) | 18.2 | 18.5 | (1.3 | ) | ||||||||||
| Gross profit rate | 22.3 | % | 23.3 | % | (1.0 | ) | pts. | |||||||
| Education | ||||||||||||||
| Revenue from services | $ | 289.9 | $ | 249.4 | 16.2 | % | 16.2 | % | ||||||
| Gross profit | 42.1 | 39.3 | 7.1 | 7.1 | ||||||||||
| Total SG&A expenses | 24.0 | 23.9 | 0.3 | 0.3 | ||||||||||
| Business unit profit (loss) | 18.1 | 15.4 | 17.7 | |||||||||||
| Gross profit rate | 14.5 | % | 15.8 | % | (1.3 | ) | pts. | |||||||
| Outsourcing & Consulting | ||||||||||||||
| Revenue from services | $ | 108.0 | $ | 114.6 | (5.7 | ) | % | (5.5 | ) | % | ||||
| Gross profit | 35.3 | 41.6 | (15.0 | ) | (14.9 | ) | ||||||||
| Total SG&A expenses | 37.1 | 41.7 | (11.1 | ) | (11.3 | ) | ||||||||
| Business unit profit (loss) | (1.8 | ) | (0.1 | ) | NM | |||||||||
| Gross profit rate | 32.7 | % | 36.3 | % | (3.6 | ) | pts. | |||||||
| International | ||||||||||||||
| Revenue from services | $ | — | $ | 195.8 | (100.0 | ) | % | (100.0 | ) | % | ||||
| Gross profit | — | 29.7 | (100.0 | ) | (100.0 | ) | ||||||||
| Total SG&A expenses | — | 30.4 | (100.0 | ) | (100.0 | ) | ||||||||
| Business unit profit (loss) | — | (0.7 | ) | (100.0 | ) | |||||||||
| Gross profit rate | — | % | 15.2 | % | (15.2 | ) | pts. | |||||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||||
| (UNAUDITED) | |||||||||||||
| (In millions of dollars) | |||||||||||||
| March 31, 2024 | December 31, 2023 | April 2, 2023 | |||||||||||
| Current Assets | |||||||||||||
| Cash and equivalents | $ | 200.7 | $ | 125.8 | $ | 111.7 | |||||||
| Trade accounts receivable, less allowances of | 1,152.9 | 1,160.6 | 1,438.5 | ||||||||||
| Prepaid expenses and other current assets | 83.2 | 48.9 | 82.3 | ||||||||||
| Assets held for sale | — | 291.3 | — | ||||||||||
| Total current assets | 1,436.8 | 1,626.6 | 1,632.5 | ||||||||||
| Noncurrent Assets | |||||||||||||
| Property and equipment, net | 25.5 | 24.6 | 28.6 | ||||||||||
| Operating lease right-of-use assets | 46.3 | 47.1 | 65.0 | ||||||||||
| Deferred taxes | 318.9 | 321.1 | 301.9 | ||||||||||
| Retirement plan assets | 243.7 | 230.3 | 204.4 | ||||||||||
| Goodwill, net | 151.1 | 151.1 | 151.1 | ||||||||||
| Intangibles, net | 132.5 | 137.7 | 153.4 | ||||||||||
| Other assets | 40.6 | 43.1 | 51.7 | ||||||||||
| Total noncurrent assets | 958.6 | 955.0 | 956.1 | ||||||||||
| Total Assets | $ | 2,395.4 | $ | 2,581.6 | $ | 2,588.6 | |||||||
| Current Liabilities | |||||||||||||
| Accounts payable and accrued liabilities | $ | 581.2 | $ | 646.1 | $ | 684.7 | |||||||
| Operating lease liabilities | 8.4 | 8.4 | 14.3 | ||||||||||
| Accrued payroll and related taxes | 165.9 | 156.2 | 275.9 | ||||||||||
| Accrued workers' compensation and other claims | 22.0 | 22.1 | 23.1 | ||||||||||
| Income and other taxes | 20.0 | 17.2 | 52.9 | ||||||||||
| Liabilities held for sale | — | 169.9 | — | ||||||||||
| Total current liabilities | 797.5 | 1,019.9 | 1,050.9 | ||||||||||
| Noncurrent Liabilities | |||||||||||||
| Operating lease liabilities | 42.0 | 42.9 | 53.4 | ||||||||||
| Accrued workers' compensation and other claims | 40.9 | 40.9 | 41.0 | ||||||||||
| Accrued retirement benefits | 229.5 | 217.4 | 184.6 | ||||||||||
| Other long-term liabilities | 8.7 | 6.8 | 10.9 | ||||||||||
| Total noncurrent liabilities | 321.1 | 308.0 | 289.9 | ||||||||||
| Stockholders' Equity | |||||||||||||
| Common stock | 38.5 | 38.5 | 38.5 | ||||||||||
| Treasury stock | (53.1 | ) | (57.3 | ) | (35.3 | ) | |||||||
| Paid-in capital | 27.1 | 30.6 | 26.4 | ||||||||||
| Earnings invested in the business | 1,264.8 | 1,241.7 | 1,224.4 | ||||||||||
| Accumulated other comprehensive income (loss) | (0.5 | ) | 0.2 | (6.2 | ) | ||||||||
| Total stockholders' equity | 1,276.8 | 1,253.7 | 1,247.8 | ||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,395.4 | $ | 2,581.6 | $ | 2,588.6 | |||||||
| STATISTICS: | |||||||||||||
| Working Capital | $ | 639.3 | $ | 606.7 | $ | 581.6 | |||||||
| Current Ratio | 1.8 | 1.6 | 1.6 | ||||||||||
| Debt-to-capital % | 0.0 | % | 0.0 | % | 0.0 | % | |||||||
| Global Days Sales Outstanding | 58 | 59 | 59 | ||||||||||
| Year-to-Date Free Cash Flow | $ | (29.2 | ) | $ | 61.4 | $ | (17.9 | ) | |||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| FOR THE 13 WEEKS ENDED MARCH 31, 2024 AND APRIL 2, 2023 | ||||||
| (UNAUDITED) | ||||||
| (In millions of dollars) | ||||||
| 2024 | 2023 | |||||
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 25.8 | $ | 10.9 | ||
| Adjustments to reconcile net earnings to net cash from operating activities: | ||||||
| Gain on sale of EMEA staffing operations | (11.6 | ) | — | |||
| Depreciation and amortization | 8.0 | 8.4 | ||||
| Operating lease asset amortization | 2.2 | 4.3 | ||||
| Provision for credit losses and sales allowances | 0.5 | 0.4 | ||||
| Stock-based compensation | 2.8 | 3.1 | ||||
| Gain on sale of equity securities | — | (2.0 | ) | |||
| Gain on forward contract | (1.2 | ) | — | |||
| Other, net | (0.2 | ) | (0.3 | ) | ||
| Changes in operating assets and liabilities, net of acquisition | (51.8 | ) | (38.3 | ) | ||
| Net cash used in operating activities | (25.5 | ) | (13.5 | ) | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (3.7 | ) | (4.4 | ) | ||
| Proceeds from sale of EMEA staffing operations, net of cash disposed | 77.1 | — | ||||
| Payment for settlement of forward contract | (2.4 | ) | — | |||
| Proceeds from equity securities | — | 2.0 | ||||
| Other investing activities | 1.1 | 0.2 | ||||
| Net cash from (used in) investing activities | 72.1 | (2.2 | ) | |||
| Cash flows from financing activities: | ||||||
| Net change in short-term borrowings | — | (0.7 | ) | |||
| Financing lease payments | — | (0.4 | ) | |||
| Dividend payments | (2.7 | ) | (2.8 | ) | ||
| Payments of tax withholding for stock awards | (1.9 | ) | (1.2 | ) | ||
| Buyback of common shares | — | (18.3 | ) | |||
| Contingent consideration payments | — | (1.4 | ) | |||
| Other financing activities | (0.1 | ) | — | |||
| Net cash used in financing activities | (4.7 | ) | (24.8 | ) | ||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (0.6 | ) | (0.8 | ) | ||
| Net change in cash, cash equivalents and restricted cash | 41.3 | (41.3 | ) | |||
| Cash, cash equivalents and restricted cash at beginning of period | 167.6 | 162.4 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 208.9 | $ | 121.1 | ||
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||||||||
| REVENUE FROM SERVICES BY GEOGRAPHY | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| (In millions of dollars) | ||||||||||||||
| First Quarter | ||||||||||||||
| % | CC % | |||||||||||||
| 2024 | 2023 | Change | Change | |||||||||||
| Americas | ||||||||||||||
| United States | $ | 933.6 | $ | 959.2 | (2.7 | ) | % | (2.7 | ) | % | ||||
| Canada | 45.4 | 44.9 | 1.3 | 1.0 | ||||||||||
| Puerto Rico | 24.9 | 26.9 | (7.4 | ) | (7.4 | ) | ||||||||
| Mexico | 18.9 | 16.7 | 13.1 | 3.0 | ||||||||||
| Total Americas Region | 1,022.8 | 1,047.7 | (2.4 | ) | (2.6 | ) | ||||||||
| Europe | ||||||||||||||
| Switzerland | 1.1 | 52.9 | (97.9 | ) | (98.0 | ) | ||||||||
| France | — | 47.8 | (100.0 | ) | (100.0 | ) | ||||||||
| Portugal | — | 44.4 | (100.0 | ) | (100.0 | ) | ||||||||
| Italy | — | 16.9 | (100.0 | ) | (100.0 | ) | ||||||||
| Other | 9.7 | 47.7 | (79.7 | ) | (80.1 | ) | ||||||||
| Total Europe Region | 10.8 | 209.7 | (94.9 | ) | (95.0 | ) | ||||||||
| Total Asia-Pacific Region | 11.5 | 10.9 | 5.8 | 11.0 | ||||||||||
| Total Kelly Services, Inc. | $ | 1,045.1 | $ | 1,268.3 | (17.6 | ) | % | (17.7 | ) | % | ||||
| KELLY SERVICES, INC. AND SUBSIDIARIES | |||||||
| RECONCILIATION OF NON-GAAP MEASURES | |||||||
| FIRST QUARTER | |||||||
| (UNAUDITED) | |||||||
| (In millions of dollars) | |||||||
| SG&A Expenses: | 2024 | 2023 | |||||
| As reported | $ | 190.5 | $ | 243.4 | |||
| Transaction costs(3) | (5.6 | ) | — | ||||
| Restructuring(4) | (2.3 | ) | (6.6 | ) | |||
| Adjusted SG&A expenses | $ | 182.6 | $ | 236.8 | |||
| Earnings from Operations: | 2024 | 2023 | |||||
| As reported | $ | 26.8 | $ | 10.7 | |||
| Gain on sale of EMEA staffing operations(1) | (11.6 | ) | — | ||||
| Transaction costs(3) | 5.6 | — | |||||
| Restructuring(4) | 2.3 | 6.6 | |||||
| Adjusted earnings from operations | $ | 23.1 | $ | 17.3 |
| KELLY SERVICES, INC. AND SUBSIDIARIES | ||||||||
| RECONCILIATION OF NON-GAAP MEASURES | ||||||||
| (UNAUDITED) | ||||||||
| (In millions of dollars except per share data) | ||||||||
| First Quarter | ||||||||
| 2024 | 2023 | |||||||
| Income tax expense | $ | 4.0 | $ | 1.8 | ||||
| Taxes on gain on sale of EMEA staffing operations(1) | (1.2 | ) | — | |||||
| Taxes on gain on forward contract(2) | — | — | ||||||
| Taxes on transaction costs(3) | 1.2 | — | ||||||
| Taxes on restructuring charges(4) | 0.6 | 1.6 | ||||||
| Adjusted income tax expense | $ | 4.6 | $ | 3.4 | ||||
| First Quarter | ||||||||
| 2024 | 2023 | |||||||
| Net earnings | $ | 25.8 | $ | 10.9 | ||||
| Gain on sale of EMEA staffing operations, net of taxes(1) | (10.4 | ) | — | |||||
| Gain on forward contract, net of taxes(2) | (1.2 | ) | — | |||||
| Transaction costs, net of taxes(3) | 4.4 | — | ||||||
| Restructuring charges, net of taxes(4) | 1.7 | 5.0 | ||||||
| Adjusted net earnings | $ | 20.3 | $ | 15.9 | ||||
| First Quarter | ||||||||
| 2024 | 2023 | |||||||
| Per Share | ||||||||
| Net earnings | $ | 0.70 | $ | 0.29 | ||||
| Gain on sale of EMEA staffing operations, net of taxes(1) | (0.28 | ) | — | |||||
| Gain on forward contract, net of taxes(2) | (0.03 | ) | — | |||||
| Transaction costs, net of taxes(3) | 0.12 | — | ||||||
| Restructuring charges, net of taxes(4) | 0.05 | 0.13 | ||||||
| Adjusted net earnings | $ | 0.56 | $ | 0.42 | ||||
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) | |||||||
| First Quarter | |||||||
| 2024 | 2023 | ||||||
| Net earnings | $ | 25.8 | $ | 10.9 | |||
| Other (income) expense, net | (1.8 | ) | (2.0 | ) | |||
| Income tax expense | 4.0 | 1.8 | |||||
| Depreciation and amortization | 10.2 | 9.5 | |||||
| Gain on sale of EMEA staffing operations(1) | (11.6 | ) | — | ||||
| Gain on forward contract(2) | (1.2 | ) | — | ||||
| Transaction costs(3) | 5.6 | — | |||||
| Restructuring(4) | 2.3 | 6.6 | |||||
| Adjusted EBITDA | $ | 33.3 | $ | 26.8 | |||
| Adjusted EBITDA margin | 3.2 | % | 2.1 | % | |||
| First Quarter 2024 | |||||||||||||||||||
| Professional & Industrial | Science, Engineering & Technology | Education | Outsourcing & Consulting | International | |||||||||||||||
| Business unit profit (loss) | $ | 5.9 | $ | 18.2 | $ | 18.1 | $ | (1.8 | ) | $ | — | ||||||||
| Restructuring(4) | 0.1 | — | — | 0.6 | — | ||||||||||||||
| Adjusted EBITDA | $ | 6.0 | $ | 18.2 | $ | 18.1 | $ | (1.2 | ) | $ | — | ||||||||
| Adjusted EBITDA margin | 1.7 | % | 6.3 | % | 6.2 | % | (1.1 | )% | — | % | |||||||||
| First Quarter 2023 | |||||||||||||||||||
| Professional & Industrial | Science, Engineering & Technology | Education | Outsourcing & Consulting | International | |||||||||||||||
| Business unit profit (loss) | $ | (1.2 | ) | $ | 18.5 | $ | 15.4 | $ | (0.1 | ) | $ | (0.7 | ) | ||||||
| Restructuring(4) | 3.0 | 0.5 | 0.1 | 0.6 | 0.6 | ||||||||||||||
| Adjusted EBITDA | $ | 1.8 | $ | 19.0 | $ | 15.5 | $ | 0.5 | $ | (0.1 | ) | ||||||||
| Adjusted EBITDA margin | 0.5 | % | 6.2 | % | 6.2 | % | 0.3 | % | — | % | |||||||||
| First Quarter | |||||||
| Free Cash Flow: | 2024 | 2023 | |||||
| Net cash used in operating activities | $ | (25.5 | ) | $ | (13.5 | ) | |
| Capital expenditures | (3.7 | ) | (4.4 | ) | |||
| Free Cash Flow | $ | (29.2 | ) | $ | (17.9 | ) | |
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2024 gain on the sale of our EMEA staffing operations, the 2024 gain on forward contract, the 2024 restructuring charges, the 2024 transaction costs, and the 2023 restructuring charges are useful to understand the Company's fiscal 2024 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) Gain on sale of EMEA staffing operations represents the gain as of the first quarter-end 2024 as a result of the sale in January 2024.
(2) Gain on forward contract represents the gain recognized in the first quarter of 2024 for the settlement of the foreign currency forward contract in January 2024 that was entered into in 2023 relating to the sale of the EMEA staffing operations.
(3) Transaction costs, which includes employee termination costs and transition costs, incurred in the first quarter of 2024 directly related to the sale of the EMEA staffing operations.
(4) Restructuring charges in the first quarter of 2024 represent a continuation of the comprehensive transformation initiative that started in the second quarter of 2023 that will further streamline the Company's operating model to enhance organizational efficiency and effectiveness. These restructuring charges include
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