Kelly Services (KELYA) Q4 2023 earnings summary

Executive summary

• Q4 revenue was flat on a reported basis and down 1.3% in constant currency; demand remained affected by economic uncertainty and labor-market trends.

• Transformation actions reduced adjusted Q4 SG&A 9.5% YoY and supported structural cost efficiency; Education revenue grew 27.1%.

Financial highlights

• Q4 revenue was $1.2B, down 0.1% reported and 1.3% in constant currency; gross profit rate was 19.3%, down 100 bps YoY.

• Q4 earnings from operations were $7.3M; adjusted EBITDA was $32.5M with a 2.6% margin.

• Q4 reported net earnings were $11.4M, or $0.31/share, versus a $0.9M net loss, or $0.02/share; adjusted net earnings were $34.1M, or $0.93/share, versus $7.0M, or $0.18/share.

• FY2023 revenue was $4.8B, down 2.6% reported and 3.2% in constant currency; gross profit rate was 19.9%, down 50 bps YoY.

• FY2023 net earnings were $36.4M, or $0.98/share, versus a $62.5M loss, or $1.64/share; adjusted net earnings were $81.6M, or $2.20/share, versus $50.7M, or $1.33/share.

Outlook and guidance

• H1 2024 like-for-like revenue is expected flat to up 50 bps YoY, with a midpoint of $2.09B; outlook assumes current economic conditions and excludes European staffing operations from the 2023 base.

• H1 2024 gross profit rate guidance is 20.5%–20.7%, a 30 bps like-for-like YoY decline, primarily from business mix.

• Adjusted SG&A is expected down 5%–6%, with a midpoint expense run rate of ~$190M per quarter; adjusted EBITDA margin guidance is 3.3%–3.5%.

• EBITDA margin improvement expectation includes 40 bps from the European staffing sale and a further 30–50 bps in H1 2024; improvement is expected to continue in H1 and beyond.