On August 8, 2024, Kelly Services Inc (KELYA, Financial) released its 8-K filing for the second quarter of 2024. Kelly Services Inc is a provider of workforce solutions and consulting and staffing services. The company's operations are divided into five business segments: Professional & Industrial, Science, Engineering & Technology, Education, Outsourcing & Consulting, and International. The majority of revenue is derived from Professional & Industrial.
Performance Overview
Kelly Services Inc (KELYA, Financial) reported revenue of $1.06 billion for Q2 2024, a 13.1% decrease compared to the same quarter in 2023. This decline was primarily due to the sale of the company’s European staffing operations on January 2, 2024. Excluding this impact and the recent acquisition of Motion Recruitment Partners, LLC (MRP), revenue improved by 0.6% on an organic basis. The acquisition of MRP added 400 basis points to the reported year-over-year revenue growth.
Operating earnings for the quarter were $12.2 million, compared to $6.2 million in Q2 2023. Adjusted earnings were $28.1 million, up from $14.2 million in the same period last year. The increase in adjusted earnings includes a loss on the sale of European staffing operations, charges related to transformation actions, and a gain on the sale of assets related to the Ayers Group. The acquisition of MRP contributed $1.5 million to earnings from operations in Q2 2024.
Financial Achievements and Challenges
Despite the revenue decline, Kelly Services Inc (KELYA, Financial) achieved a significant improvement in its adjusted EBITDA margin, which increased by 170 basis points to 3.7%. This was driven by a meaningful reduction in operating expenses resulting from business transformation initiatives and the sale of European staffing operations. The company expects further expansion of its EBITDA margin following the acquisition of MRP.
“In the second quarter, employers continued to take a cautious approach to hiring, though customer demand stabilized on a sequential basis across much of our business – a development that is reflected in Kelly’s organic revenue for the quarter,” said Peter Quigley, president and chief executive officer.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Revenue from services | $1,057.5 million | $1,217.2 million | -13.1% |
| Gross profit | $213.7 million | $240.6 million | -11.2% |
| Operating earnings | $12.2 million | $6.2 million | 95.9% |
| Net earnings | $4.6 million | $7.5 million | -38.7% |
| Adjusted EBITDA | $40.5 million | $24.6 million | 64.6% |
Balance Sheet and Cash Flow
As of June 30, 2024, Kelly Services Inc (KELYA, Financial) reported total assets of $2.63 billion, up from $2.58 billion at the end of 2023. The company’s cash and equivalents stood at $38.2 million, a significant decrease from $125.8 million at the end of 2023. Total liabilities were $1.35 billion, with stockholders' equity amounting to $1.28 billion.
Segment Performance
Revenue from the Professional & Industrial segment declined by 8.5% year-over-year, while the Science, Engineering & Technology segment saw a 10.2% increase. The Education segment experienced a 21.7% growth in revenue, and the Outsourcing & Consulting segment reported a 2.9% increase. The International segment's revenue was not reported due to the sale of European staffing operations.
Analysis
Kelly Services Inc (KELYA, Financial) faced challenges due to the sale of its European staffing operations, which significantly impacted its revenue. However, the company’s focus on business transformation and strategic acquisitions like MRP has led to improved operating earnings and adjusted EBITDA margins. The cautious approach to hiring by employers continues to affect the company’s performance, but the stabilization of customer demand and ongoing efficiency initiatives position Kelly Services Inc (KELYA) for potential growth as market conditions improve.
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Explore the complete 8-K earnings release (here) from Kelly Services Inc for further details.
