Kelly Services(US:KELYA)2025-02-13 18:51Revenue and Profitability - Revenue from services decreased by 10.4% to $4,331.8 million in 2024, compared to $4,835.7 million in 2023, primarily due to the sale of EMEA staffing operations[142] - Gross profit declined by 8.2% to $882.6 million, with a gross profit rate of 20.4%, an increase of 0.5 percentage points from the previous year[145] - Consolidated total gross profit decreased by 8.2% from $961.4 million in 2023 to $882.6 million in 2024[166] - The gross profit rate for the Professional & Industrial segment decreased by 20 basis points, primarily due to declines in permanent placement revenue[167] - Science, Engineering & Technology segment gross profit increased due to the acquisition of MRP, with a gross profit rate increase of 120 basis points[168] - Education segment gross profit increased by 8.6% from $128.7 million in 2023 to $139.8 million in 2024, despite a 90 basis point decrease in gross profit rate[169] - Outsourcing & Consulting segment gross profit decreased, with a gross profit rate decline of 480 basis points due to a change in business mix[170] - The company reported a net loss of $0.6 million in 2024, a significant decline from net earnings of $36.4 million in 2023[153] Expenses and Cost Management - Total SG&A expenses decreased by 12.4% to $818.4 million, with restructuring charges significantly reduced from $38.6 million in 2023 to $6.1 million in 2024[146] - Total SG&A expenses decreased by 14.3% from $894.6 million in 2023 to $766.9 million in 2024, primarily due to lower direct salaries[178] - Corporate expenses decreased year-over-year primarily due to lower transformation-related charges, despite higher transaction-related expenses[196] Acquisitions and Sales - The acquisition of Motion Recruitment Partners, LLC on May 31, 2024, is expected to enhance staffing and consulting capabilities across technology and government specialties[135] - The company completed the sale of its European staffing operations on January 2, 2024, and the Ayers Group on June 12, 2024, focusing on a streamlined North American model[134] - The company completed the sale of its EMEA staffing operations for cash proceeds of $110.6 million, net of cash disposed[220] - The company acquired 100% of MRP for a purchase price of $425.0 million, resulting in a cash payment of $440.0 million[221] Cash Flow and Working Capital - Cash, cash equivalents, and restricted cash totaled $45.6 million at year-end 2024, down from $167.6 million at year-end 2023[205] - The company generated $26.9 million of net cash from operating activities in 2024, a decrease from $76.7 million in 2023, primarily due to increased working capital requirements[206] - Trade accounts receivable increased to $1.3 billion at year-end 2024 from $1.2 billion at year-end 2023, with global Days Sales Outstanding (DSO) remaining at 59 days[207] - The company's working capital position was $539.0 million at year-end 2024, down from $606.7 million at year-end 2023, primarily due to lower cash balances[208] Debt and Financing - Financing activities generated $214.8 million in 2024, compared to cash used of $59.6 million in 2023, primarily due to net borrowings of $239.4 million related to the acquisition of MRP[213] - The debt-to-total capital ratio was 16.2% at year-end 2024, with no debt outstanding at year-end 2023[215] - The company repurchased $10.0 million of Class A common stock in fiscal 2024, with $40.0 million remaining under the share repurchase program[226] Goodwill and Impairment - The company recorded a goodwill impairment charge of $72.8 million for the Softworld reporting unit in 2024, with a remaining goodwill balance of $38.5 million[246] - Total goodwill amounted to $304.2 million at year-end 2024, compared to $151.1 million at year-end 2023[252] - The company performed annual impairment tests for all reporting units with goodwill, concluding that the estimated fair value of the Softworld reporting unit no longer exceeded its carrying value[246] Tax and Valuation - The company recorded an $18.4 million tax benefit associated with the goodwill impairment charge for Softworld[246] - The company utilizes third-party valuation specialists to determine the fair value of acquired intangible assets, including trade names and customer relationships[235] - The fair value of trade name intangibles is determined using the relief-from-royalty method, while customer relationship intangibles are assessed using the multi-period excess earnings method[235] - The company evaluates its tax accruals regularly, with current tax accruals presented in income and other taxes on the consolidated balance sheet[238] Foreign Currency and Risk Management - The Company entered into a foreign currency forward contract with a notional amount of €90.0 million to manage foreign currency risk, resulting in an unrealized loss of $3.6 million as of year-end 2023[262] - A total loss of $2.4 million was realized upon settlement of the foreign currency forward contract on January 5, 2024, leading to a gain of $1.2 million recorded in the first quarter of 2024[262] - The Company entered into another foreign currency forward contract with a notional amount of €17.0 million related to expected additional proceeds from the sale of EMEA staffing operations[263] - The Company is exposed to foreign currency risk primarily related to its foreign subsidiaries, which provide a natural hedge against currency risks[261] - Changes in foreign currency rates generally do not impact local cash flows due to the nature of the Company's foreign operations[261] Insurance and Compensation - The Company retains an independent consulting actuary to establish ultimate loss forecasts for its insurance and self-insurance programs[233] - The accrual for workers' compensation was $44.4 million at year-end 2024, up from $43.6 million at year-end 2023[234] - The obligation to pay benefits under the nonqualified deferred compensation plan is influenced by movements in equity and debt markets[266]