Revenue Performance - Revenue from services decreased by 2.6% to $4,835.7 million in 2023 compared to $4,965.4 million in 2022[130]. - The Education segment saw a significant revenue increase of 32.3% to $841.9 million, driven by improved fill rates and new customer wins[145][148]. - The Professional & Industrial segment experienced an 11.0% revenue decline to $1,483.1 million, primarily due to a 16.2% drop in staffing services[145][146]. - Permanent placement revenue decreased by 33.6% from 2022, impacting overall revenue performance[131]. Gross Profit and Margins - Gross profit declined by 5.0% to $961.4 million, with a gross profit rate of 19.9%, down 0.5 percentage points from 2022[130][132]. - Consolidated total gross profit decreased by 5.0% to $961.4 million in 2023 from $1,011.8 million in 2022[153]. - The gross profit rate for the consolidated total declined by 0.5 percentage points to 19.9% in 2023 from 20.4% in 2022[153]. - Professional & Industrial segment gross profit decreased by 12.7% to $263.9 million, with a gross profit rate decline of 0.4 percentage points to 17.8%[153][154]. - Science, Engineering & Technology segment gross profit decreased by 8.4% to $272.0 million, with a gross profit rate decline of 0.7 percentage points to 22.8%[153][155]. - Education segment gross profit increased by 28.4% to $128.7 million, despite a gross profit rate decrease of 0.5 percentage points to 15.3%[153][155]. Operating Expenses - Total SG&A expenses decreased by 0.9% to $934.7 million, with restructuring charges and transaction costs amounting to $42.4 million[130][133]. - Corporate expenses increased by 29.8% to $121.9 million, primarily due to restructuring and transformation charges[165]. Earnings and Cash Flow - The net earnings for 2023 were $36.4 million, a significant recovery from a net loss of $62.5 million in 2022[143]. - Earnings from Operations for the consolidated total increased by 65.0% to $24.3 million in 2023 from $14.8 million in 2022[168]. - Education segment earnings increased by 96.6% to $36.3 million, driven by higher revenue and gross profit[170]. - Free cash flow is a key measure indicating changes in cash balances from operating activities, net of capital expenditures[127]. Cash and Liquidity - Cash, cash equivalents, and restricted cash totaled $167.6 million at year-end 2023, an increase from $162.4 million at year-end 2022[177]. - The company expects to meet cash requirements through operations, cash equivalents, and a $200.0 million revolving credit facility, which had full available capacity at year-end 2023[193]. - The company repurchased $42.2 million of Class A common stock in fiscal 2023, completing a $50.0 million share repurchase program[195]. - The company had $100.6 million of available capacity on its $150.0 million securitization facility at year-end 2023[193]. Obligations and Commitments - At year-end 2023, the company had total contractual obligations of $445.9 million, with $97.9 million due within one year[188]. - The company has no material unrecorded commitments or guarantees associated with related parties or unconsolidated entities[188]. Goodwill and Impairment - The annual impairment test for goodwill was completed, determining that the estimated fair value of the Softworld and PTS reporting units exceeded their carrying values, with the PTS reporting unit exceeding by more than 10%[213][214]. - The estimated fair value of the Softworld reporting unit exceeded its carrying value by less than 10%, indicating potential future impairment risks if revenue and profit margin expectations are not met[214]. - Total goodwill remained constant at $151.1 million for both year-end 2023 and 2022[218]. - A total goodwill impairment charge of $41.0 million was recorded for RocketPower as of year-end 2022, including $30.7 million in Q3 and $10.3 million in Q4[217]. Risk Management - A foreign currency forward contract with a notional amount of €90 million was entered into to manage foreign currency risk, resulting in a total loss of $2.4 million upon settlement[227]. - An unrealized loss of $3.6 million associated with the forward contract was recorded as of December 31, 2023, with a projected gain of $1.2 million expected in Q1 2024[227]. - Interest rate risks are present due to the use of a multi-currency line of credit, but a hypothetical 10% fluctuation in market interest rates would not materially impact 2023 earnings[228]. - The company is exposed to market risk from obligations under its nonqualified deferred compensation plan, which fluctuate based on equity and debt market movements[229]. Strategic Focus - The company is focused on a refreshed go-to-market strategy to enhance service delivery to large enterprise customers in 2024[121]. - EBITDA margin improvements are expected as the company streamlines operations following the sale of its European staffing operations[122]. - The company expects working capital requirements to increase if demand for services rises[192]. - The company utilizes a global cash pooling arrangement to optimize capital resources among subsidiaries[191]. - The company has $33.5 million of international cash classified as held for sale related to the EMEA operations[191].
Kelly Services(KELYB) - 2023 Q4 - Annual Report