Kelly’s fourth-quarter revenue up 1% in constant currency trims stake in Asia-Pacific joint venture

February 14, 2022

Kelly (NASDAQ: KELYA, KELYB), the world’s eighth-largest staffing firm, reported fourth-quarter revenue grew 1.1% in constant currency; the increase was 0.7% in published data. The Troy, Michigan-based recruiting giant said the economic recovery was continuing, but the impact of Covid variants and talent supply challenges remained. Kelly also announced that it was reducing its stake in PersolKelly Pte. ltd. — which serves Asia-Pacific markets — and will end cross-shareholding with Japan-based staffing firm Persol Holdings Co. Ltd., its partner in PersolKelly.

“Our fourth quarter results reflect that the economic recovery continues,” said Kelly President and CEO Peter Quigley. “While our revenue growth in the quarter was impacted by the supply of talent, we are pleased with our ability to leverage growth to deliver strong gross profit and earnings improvements.”

Fourth quarter US revenue increased 2.0%.

(in millions of dollars) Q4 2021 Q4 2020 % cash % constant currency
Income $1,250.3 $1,241.4 0.7% 1.1%
Gross profit $246.0 $224.1 9.8% 10.1%
Gross margin 19.7% 18.1%
net profit $71.7 $23.4 207.1%

Kelly said the fourth quarter of 2020 had an additional week compared to the fourth quarter of 2021 and that was impacting revenue. Adjusted for the extra week in 2020, fourth quarter 2021 revenue increased 6.0%.

The company also noted that its April 2021 acquisition of Softworld Inc. had a favorable impact on growth of 290 basis points, while legislative changes in Mexico had a negative impact of 210 basis points.

The fourth quarter of 2021 also includes $4.1 million of restructuring charges, while the fourth quarter of 2020 includes $4.4 million of restructuring charges.

Revenue by segment

(in millions of dollars) Q4 2021 Q4 2020 % cash % constant currency
Professional & industrial $450.7 $511.7 -11.9% -12.1%
Science, Engineering and Technology $297.7 $257.6 15.5% 15.5%
Education $132.4 $91.8 44.3% 44.3%
Outsourcing & Consulting $112.1 $102.5 9.3% 9.4%
International $257.7 $278.0 -7.2% -5.4%

Revenue by geographic area

(in millions of dollars) Q4 2021 Q4 2020 % cash % constant currency
Americas
United States $908.6 $891.0 2.0% 2.0%
Canada $38.1 $33.8 12.6% 8.6%
Porto Rico $25.5 $20.9 21.6% 21.6%
Mexico $10.6 $35.8 -70.5% -70.1%
Europe
Switzerland $61.0 $59.2 3.1% 4.9%
France $55.0 $57.0 -3.5% 0.5%
Portugal $37.3 $42.6 -12.4% 8.6%
Russia $32.9 $29.9 9.8% 4.9%
Italy $18.2 $15.7 15.8% 20.7%
UK $16.4 $17.2 -4.5% -6.7%
Germany $9.4 $8.0 17.4% 22.3%
Ireland $8.0 $5.9 36.9% 42.4%
Other Europe $18.1 $15.9 13.5% 17.4%
Asia Pacific
Total Asia-Pacific $11.2 $8.5 33.3% 34.5%

Annual results

(in millions of dollars) FISCAL YEAR 2021 FISCAL YEAR 2020 % cash % constant currency
Income $4,909.7 $4,516.0 8.7% 7.8%
Gross profit $919.2 $827.6 11.1% 10.1%
Gross margin 18.7% 18.3%
net profit $156.1 ($72.0) nm

PersolKelly

Additionally, Kelly today announced the sale of 106,465,173 shares of PersolKelly Pte., its joint venture with Persol, for a purchase price of $119.5 million.

Following the sale, Kelly will own 2.5% of PersolKelly while Persol will own 97.5%.

Plans are that the companies’ recruiting business won’t compete in Asia Pacific, but KellyOCG — which provides MSP, RPO and other services — will continue to operate in the region.

Francis Koh will continue to lead PersolKelly as CEO and Pete Hamilton will continue to lead KellyOCG in the region.

Additionally, Kelly and Persol will end their cross involvement in each other. Kelly will sell his 9,106,800 shares in Persol and buy back the Kelly shares that Persol owns.

“Kelly is already building on our 2021 momentum, which included Softworld, our largest acquisition to date, the creation of a strong and diverse management team, and the introduction of new solutions and products to our specialty businesses,” Quigley said. “With the additional transactions announced today, Kelly will free up significant capital to invest in our specialty strategy, positioning us for increased growth and profitability in 2022 and beyond.”

Advice

Kelly forecasts full-year 2022 revenue to be up 4.5% to 5.5%. Gross margin should be 19.4%.

Stock price and market capitalization

Kelly shares rose 19.62% to $20.64 at 12:45 p.m. EST; they were 29.90% above their 52-week low, according to FT.com. The company had a market cap of $682.8 million.

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