Attached files
| file | filename |
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| 8-K - 8-K - KELLY SERVICES INC | form8-k2017firstquarter.htm |
| EX-99.1 - EXHIBIT 99.1 - KELLY SERVICES INC | a20171qearningsreleaseform.htm |
Kelly Services, Inc.
First Quarter
May 11, 2017
Exhibit 99.2
Safe Harbor Statement
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and
uncertainties. These factors include, but are not limited to, competitive market pressures including pricing and
technology introductions, changing market and economic conditions, our ability to achieve our business strategy,
the risk of damage to our brand, the risk our intellectual assets could be infringed upon or compromised, our
ability to successfully develop new service offerings, our exposure to risks associated with services outside
traditional staffing, including business process outsourcing, our increasing dependency on third parties for the
execution of critical functions, the risks associated with past and future acquisitions, exposure to risks associated
with investments in equity affiliates, material changes in demand from or loss of large corporate customers, risks
associated with conducting business in foreign countries, including foreign currency fluctuations, availability of
full-time employees to lead complex talent supply chain sales and operations, availability of temporary workers
with appropriate skills required by customers, liabilities for employment-related claims and losses, including class
action lawsuits and collective actions, the risk of cyber attacks or other breaches of network or information
technology security as well as risks associated with compliance on data privacy, our ability to sustain critical
business applications through our key data centers, our ability to effectively implement and manage our
information technology programs, our ability to maintain adequate financial and management processes and
controls, impairment charges triggered by adverse industry developments or operational circumstances,
unexpected changes in claim trends on workers’ compensation, disability and medical benefit plans, the impact of
the Patient Protection and Affordable Care Act on our business, the impact of changes in laws and regulations
(including federal, state and international tax laws ), the risk of additional tax or unclaimed property liabilities in
excess of our estimates, our ability to maintain specified financial covenants in our bank facilities to continue to
access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company’s
filings with the Securities and Exchange Commission. Actual results may differ materially from any forward looking
statements contained herein, and we have no intention to update these statements.
2
First Quarter 2017 Highlights
(YOY Comparisons)
Total revenue declined 4%
– Excluding APAC results in 2016, total revenue increased 3%
Gross profit down 1%
– Excluding APAC results in 2016, gross profit up 7%
Earnings from operations of $16.4 million, up 11% YOY
– Includes $2.4 million of restructuring expenses
– Excluding restructuring expenses in 2017 and APAC results in 2016,
earnings from operations up more than 80% YOY
Diluted earnings per share of $0.31, up $0.02
– Excluding restructuring expenses in 2017 and APAC staffing results
in 2016, diluted earnings per share up $0.16
3
Results reflect the deconsolidation of APAC at the beginning of Q3 2016 and $2.4 million of
restructuring expenses in the first quarter of 2017
Continued GP rate improvement, partially driven by one-time items
Earnings from operations increased by 11% including the impact of the $2.4 million of
restructuring expenses
-----
(1)Constant Currency represent year-over-year changes resulting from translating 2017 financial data into USD using 2016 exchange rates.
First Quarter 2017 Financial Summary
4
Actual Results Change
Constant
Currency
Change(1)
Reve ue $1.3B (4.4)% (4.2)%
GP % 18.0% 70 bps
Earnings from Operations $16.4M 11.2% 11.8%
ROS % 1.3% 20 bps
EPS $0.31 $0.02
-----
(1) Excludes 2016 results from APAC related to the deconsolidation, and $2.4 million of restructuring charges, $1.7 million net of tax or $0.04 per share in
Q1 2017.
(2) Constant Currency represent year-over-year changes resulting from translating 2017 financial data into USD using 2016 exchange rates.
Revenue growth reflects the growth in our staffing business in the Americas and
International, partially offset by a slight decline in GTS revenue
Earnings from operations increased more than 80% and improved in all three operating
segments
EPS growth reflects improving top-line growth, GP rate improvement, and expense control
First Quarter 2017 Financial Summary
(Excluding APAC & Restructuring)
5
Actual Results Change(1)
Constant
Currency
Change(2)
Revenue $1.3B 2.6% 2.9%
GP % 18.0% 80 bps
Earnings from Operations $18.8M 82.6% 83.6%
ROS % 1.5% 70 bps
EPS 0.35$ 0.16$
Americas staffing revenues reflect a return to top-line growth
International staffing is impacted by the deconsolidation of APAC staffing at the end
of 2016. Excluding APAC staffing, the segment grew revenue at 8%
First Quarter 2017 Revenue Growth
6
44%
18%
38%
Business Mix
Americas Staffing International Staffing Global Talent Solutions
-30%
-20%
-10%
0%
10%
20%
30%
Total Americas Staffing International Staffing Global Talent
Solutions
YoY Growth
Reported Constant Currency Excluding APAC in 2016
First Quarter 2017 Gross Profit Growth
Americas staffing GP reflects top-line growth, coupled with a 20 basis point GP rate
improvement
International staffing reflects the impact of the deconsolidation of the APAC staffing
business. Excluding the impact, GP grew 13%
GTS GP growth reflects strong GP rate improvement on flat revenue
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45%
16%
39%
Business Mix
Americas Staffing International Staffing Global Talent Solutions
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Total Americas Staffing International Staffing Global Talent
Solutions
YoY Growth
Reported Constant Currency Excluding APAC in 2016
17.3%
18.0%
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
Q1 2016 GP Rate Americas Staffing Global Talent
Solutions
Perm Fees & Other APAC Deconsolidation Q1 2017 GP Rate
First Quarter 2017 Gross Profit Rate
Overall GP rate up due to the favorable impact related to improving GP rate in GTS
and Americas Staffing as well as the APAC deconsolidation, partially offset by lower
perm fees
GTS GP rate improvement due to a favorable business and customer mix, as well as,
a decrease in workers’ compensation and other employee-related costs
10 bps
60 bps
8
10 bps
-10 bps
$218
$215
$200
$202
$204
$206
$208
$210
$212
$214
$216
$218
$220
Q1 2016 SG&A International Staffing FX Corporate Restructuring Global Talent
Solutions
Q1 2017 SG&A
First Quarter 2017 SG&A
International staffing reflects the deconsolidation of our APAC business upon closing the APAC
JV transaction in the third quarter of 2016
Corporate expenses reflect higher performance-based compensation expenses
Restructuring expenses primarily relate to costs to optimize the GTS delivery model
GTS expense growth results from increasing salary expenses as well as costs related to
additional sales resources
$(10)
$(1)
$2
$2
$ in Millions
$4
9
First Quarter 2017 Conversion Rate
-----
(1)Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit.
APAC results are no longer included in the international staffing or total
Company’s gross profit or earnings from operations upon closing of the APAC JV
transaction at the beginning of the third quarter of 2016
$ in Millions
10
2017 2016
Gross Earnings Conversion Gross Earnings Conversion Change
Profit from Ops Rate(1) Profit from Ops Rate(1) (bps)
Americ s Staffing 105.3$ 21.2$ 20.1% 100.7$ 17.1$ 16.9% 320
Global Talent
Solutions
90.5 15.3 16.9% 85.3 13.7 16.0% 90
International
Staffing
36.4 5.2 14.4% 47.8 6.6 14.0% 40
Total Company 231.6$ 16.4$ 7.1% 232.7$ 14.7$ 6.3% 80
First Quarter 2017 Conversion Rate
(Excluding APAC & Restructuring)
$ in Millions
-----
(1) Excludes 2016 results from APAC related to the deconsolidation, and $2.4 million of restructuring charges in Q1 2017.
(2) Conversion rate represents earnings from operations as a percent of gross profit, or return on gross profit.
Conversion rate improved in all business segments
Overall Q1 conversion rate improved year-over-year to 8.1% (excluding
restructuring expenses), and was up 340 bps from the prior year.
11
2017 2016
Gross Earnings Conversion Gross Earnings Conversion Change
Profit from Ops Rate(2) Profit(1) from Ops(1) Rate(2) (bps)
Am ricas Staffing 105.3$ 21.6$ 20.5% 100.7$ 17.1$ 16.9% 360
Global Talent
Solutions
90.5 17.3 19.1% 84.6 13.7 16.2% 290
International
Staffing
36.4 5.2 14.4% 32.3 2.2 6.9% 750
Total Company 231.6$ 18.8$ 8.1% 216.4$ 10.2$ 4.7% 340
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
2016 Q1 2016 2017 Q1
Accounts Receivable
Excluding APAC APAC
First Quarter 2017 Balance Sheet Data
12
DSO is flat versus the same period last year and up sequentially due to seasonal
fluctuations
Continue to operate debt free
$ in Millions
DSO 55 53 55 Debt-to- 4.1% 0.0% 0.0%
Equity Ratio
$0
$20
$40
$60
2016 Q1 2016 2017 Q1
Debt
(and Debt-to-Equity Ratio)
2017 Outlook – Second Quarter
Revenue down 3.5% to 4.5% YOY
– Excluding the impact of the APAC results in 2016,
revenue up 2.5% to 3.5%
Gross profit rate up YOY, but down sequentially
SG&A down 3.5% to 4.5% YOY
– Excluding APAC results in 2016, SG&A up 2.5% to 3.5%
13
2017 Outlook – Full Year
Revenue down 1% to flat YOY
– No significant foreign exchange impact expected
– Excluding the impact of the APAC results in the first half of
2016, revenue up 3.0% to 4.0%
Gross profit rate up YOY
SG&A down 1% to flat YOY
– Excluding APAC results in the first half of 2016, SG&A up 3.0%
to 4.0%
Annual tax rate in mid-20% range, including impact of Work
Opportunity Credits
14
APPENDIX:
TS KELLY ASIA PACIFIC JOINT VENTURE
Highlights – TS Kelly Asia Pacific
Joint Venture capitalizes on the strong reputation of Kelly Services as a
leading talent provider in the region and on Temp Holdings’ regional
presence
– Provides accelerated growth opportunities, larger workforce
solutions presence, and enhanced competitive positioning
– Expands on 14-year strategic partnership between Kelly and
Temp Holdings
TS Kelly Asia Pacific is expected to be one of the largest workforce
solutions companies in the Asia Pacific region
Solidifies Kelly’s focus on OCG solutions in the APAC market
– Opportunity to accelerate investment in high growth market
– Kelly’s outsourcing and consulting group, KellyOCG, is not part
of the joint venture and will continue to operate under the
complete control of Kelly
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Expands scope from four geographies to twelve, with headquarters in
Singapore
Brings together established businesses with approximately $500 million
in revenue and 1,600 employees
– TS Kelly North Asia – China, Hong Kong, Taiwan, South Korea
– Kelly Services – Singapore, Malaysia, Australia, New Zealand,
India, Indonesia, Thailand
– Capita – Singapore and Malaysia
– First Alliances – Vietnam
– Intelligence – Indonesia, Vietnam, Singapore, Malaysia
Highlights – TS Kelly Asia Pacific
17
Closed on July 4, 2016, the JV was formed through asset transfers from Kelly and
Temp Holdings, and a $36.5 million cash payment to Kelly at closing and a $4.5
million cash true-up payment made to Kelly in Q4 2016
Temp Holdings owns 51%, Kelly owns 49%
Beginning in the third quarter, Kelly accounts for its 49% interest as an Equity
Method Investment
– APAC results are no longer included in the individual lines of
Kelly’s consolidated income statement or balance sheet
• Equity method investment asset will be reported as a single line item on the
balance sheet
• 49% share of income reflected as Income from equity method investments
(below earnings from operations), effective on the transaction closing date
» Will no longer be included as revenue, cost of service, and SG&A
expense
TS Kelly Asia Pacific – Transaction Details
18