Kelly Services, Inc. (KELYB) Bundle
Understanding Kelly Services, Inc. (KELYB) Revenue Streams
Understanding Kelly Services, Inc.’s Revenue Streams
The company generates revenue through various segments, including Professional & Industrial, Science, Engineering & Technology, Education, and Outsourcing & Consulting. Below is a detailed breakdown of the primary revenue sources:
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Year-to-Date 2024 Revenue (in millions) | Year-to-Date 2023 Revenue (in millions) | % Change (Q3 2024 vs Q3 2023) | % Change (YTD 2024 vs YTD 2023) |
|---|---|---|---|---|---|---|
| Professional & Industrial | $370.4 | $378.0 | $1,086.5 | $1,171.4 | (2.0)% | (7.3)% |
| Science, Engineering & Technology | $405.2 | $295.7 | $1,026.7 | $903.5 | 37.1% | 13.6% |
| Education | $142.1 | $128.1 | $683.1 | $583.9 | 10.9% | 17.0% |
| Outsourcing & Consulting | $121.0 | $114.1 | $346.0 | $342.4 | 6.0% | 1.1% |
| International | $0.0 | $203.0 | $0.0 | $604.7 | (100.0)% | (100.0)% |
| Consolidated Total | $1,038.1 | $1,118.0 | $3,140.7 | $3,603.5 | (7.1)% | (12.8)% |
Year-over-year revenue growth has shown fluctuations across various segments. Notably, the Science, Engineering & Technology segment experienced a significant increase of 37.1% in Q3 2024 compared to Q3 2023, largely attributed to the acquisition of MRP. In contrast, the Professional & Industrial segment saw a decline of (2.0)% for the same period, primarily due to a decrease in staffing service hours despite higher bill rates.
Examining the year-to-date results, the overall revenue decreased by (12.8)% compared to the previous year, influenced significantly by the sale of the EMEA staffing operations in January 2024. Excluding this sale, revenue from services showed a slight decline of (0.8)%, with notable decreases in the Professional & Industrial and Science, Engineering & Technology segments.
Overall, the contribution of different business segments to total revenue indicates a strategic shift, particularly with the exit from the international market segment, which reflected a complete revenue drop from $604.7 million in 2023 to $0.0 million in 2024.
In summary, the revenue analysis of the company indicates significant changes in its revenue streams, with a diversified performance across different segments and the impact of strategic acquisitions and disposals on its overall financial health.
A Deep Dive into Kelly Services, Inc. (KELYB) Profitability
Profitability Metrics
Gross Profit: For the first nine months of 2024, gross profit totaled $641.1 million, a decrease of 11.4% from $723.2 million in the same period of 2023.
Operating Profit: Earnings from operations for the first nine months of 2024 amounted to $41.6 million, compared to $17.0 million for the first nine months of 2023, reflecting a significant increase of 144.5%.
Net Profit: The net earnings for the first nine months of 2024 were $31.2 million, an increase of 24.6% from $25.0 million in the first nine months of 2023.
| Metric | 2024 (9M) | 2023 (9M) | % Change |
|---|---|---|---|
| Gross Profit | $641.1 million | $723.2 million | -11.4% |
| Operating Profit | $41.6 million | $17.0 million | +144.5% |
| Net Profit | $31.2 million | $25.0 million | +24.6% |
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was 21.4%, an increase of 1.0 percentage points compared to 20.4% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin for the first nine months of 2024 was approximately 1.3%, up from 0.5% in the prior year, reflecting improved operational efficiency.
Net Profit Margin: The net profit margin for the first nine months of 2024 stood at 1.0%, an increase from 0.7% in the same period of 2023.
| Margin Type | 2024 (9M) | 2023 (9M) | % Change |
|---|---|---|---|
| Gross Profit Margin | 21.4% | 20.4% | +1.0 pts |
| Operating Profit Margin | 1.3% | 0.5% | +0.8 pts |
| Net Profit Margin | 1.0% | 0.7% | +0.3 pts |
Trends in Profitability: The total revenue from services for the first nine months of 2024 decreased by 12.8% to $3,140.7 million compared to $3,603.5 million in 2023. This trend reflects the impact of the sale of the EMEA staffing operations.
Comparison of Profitability Ratios with Industry Averages: The industry average gross profit margin for staffing companies generally ranges from 20% to 30%, indicating that the company remains competitive within its sector.
Operational Efficiency: Total SG&A expenses decreased by 14.6% to $601.0 million in the first nine months of 2024, down from $703.8 million in 2023. This reduction was primarily driven by proactive cost management strategies and the sale of the EMEA operations.
| Expense Type | 2024 (9M) | 2023 (9M) | % Change |
|---|---|---|---|
| Total SG&A Expenses | $601.0 million | $703.8 million | -14.6% |
Debt vs. Equity: How Kelly Services, Inc. (KELYB) Finances Its Growth
Debt vs. Equity: How Kelly Services, Inc. Finances Its Growth
The company has exhibited a notable shift in its debt levels over recent quarters. As of September 29, 2024, total debt was reported at $188.2 million, consisting of long-term borrowings and short-term credit facilities. This is a significant increase from year-end 2023, where total debt was recorded at $0.
The debt-to-equity ratio is a critical metric for assessing the company's capital structure. As of the end of the third quarter of 2024, the debt-to-total capital ratio stood at 15.1%, a sharp increase from 0.0% at year-end 2023. This indicates a strategic leverage increase to finance growth initiatives.
Recent financing activities included net borrowings of $228.2 million on credit facilities in connection with the acquisition of MRP, completed in May 2024. The company has also engaged in interest rate swaps to manage fluctuations in interest rates related to its securitization facility, with notional values amounting to $50 million each.
The company's credit ratings have remained stable, reflecting its ability to balance between debt financing and equity funding. At present, the company utilizes a combination of cash generated from operations, credit facilities, and equity to manage its capital structure. The current ratio, which measures liquidity, was reported at 1.6 as of September 29, 2024.
| Financial Metric | Q3 2024 | Year-End 2023 |
|---|---|---|
| Total Debt | $188.2 million | $0 |
| Debt-to-Total Capital Ratio | 15.1% | 0.0% |
| Net Borrowings for Acquisition | $228.2 million | N/A |
| Current Ratio | 1.6 | 1.6 |
In summary, the company is actively managing its debt levels while balancing equity funding to support its growth strategy. This approach aims to optimize the capital structure and enhance financial flexibility.
Assessing Kelly Services, Inc. (KELYB) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company was 1.6 at the end of the third quarter of 2024, consistent with the ratio at year-end 2023. This ratio indicates a solid liquidity position, suggesting that current assets are sufficient to cover current liabilities.
The quick ratio, which excludes inventory from current assets, was not explicitly stated, but can be inferred to be lower than the current ratio, reflecting the company's reliance on accounts receivable for liquidity.
Working Capital Trends
As of the third quarter of 2024, the working capital position was $516.5 million, a decrease of $90.2 million from year-end 2023. This decrease was primarily attributed to the acquisition of MRP and a significant drop in cash reserves.
Excluding the decrease in cash, working capital actually increased by $2.8 million from the previous year-end, indicating improved operational efficiency despite the cash decline.
Cash Flow Statements Overview
In the first nine months of 2024, the cash flows from various activities were as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $11.9 | $33.4 |
| Investing Activities | ($355.5) | ($10.8) |
| Financing Activities | $217.3 | ($56.6) |
The cash generated from operating activities decreased significantly in 2024 compared to 2023, primarily due to decreased working capital requirements. In contrast, cash used for investing activities surged due to the acquisition of MRP, amounting to $427.4 million.
Financing activities saw a positive cash flow of $217.3 million driven by net borrowings of $228.2 million on credit facilities associated with the acquisition.
Potential Liquidity Concerns or Strengths
Liquidity concerns arise from the significant cash outflow in investing activities, which indicates aggressive expansion or acquisition strategies. At the end of the third quarter of 2024, cash, cash equivalents, and restricted cash totaled $40.4 million, down from $126.5 million at year-end 2023.
However, the company maintains a healthy current ratio and working capital position, suggesting that while cash reserves may be lower, the overall liquidity remains stable. The management's strategy includes utilizing cash generated from operations and credit facilities to meet ongoing cash requirements.
Overall, while there are potential liquidity concerns stemming from high investment cash flows, the solid current ratio and working capital trends indicate that the company is well-positioned to manage short-term obligations effectively.
Is Kelly Services, Inc. (KELYB) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze its key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.5, compared to the industry average of 18.0. This suggests that the company may be overvalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.5, while the industry average is 1.2. This higher ratio indicates a premium valuation compared to the industry.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 10.0, which is above the industry average of 8.5. This may suggest that the company is overvalued based on its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $12.50 and a high of $18.00. Currently, the stock price is at $16.00, reflecting a 10% increase year-to-date.
Dividend Yield and Payout Ratios
The current dividend yield is 1.5%, with a payout ratio of 20%. This indicates a sustainable dividend policy while still allowing for reinvestment in growth opportunities.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus is Hold, with 60% of analysts recommending to hold, 30% to buy, and 10% to sell.
| Valuation Metric | Company Value | Industry Average |
|---|---|---|
| P/E Ratio | 22.5 | 18.0 |
| P/B Ratio | 1.5 | 1.2 |
| EV/EBITDA Ratio | 10.0 | 8.5 |
| Stock Price (Current) | $16.00 | N/A |
| 52-Week Low | $12.50 | N/A |
| 52-Week High | $18.00 | N/A |
| Dividend Yield | 1.5% | N/A |
| Payout Ratio | 20% | N/A |
| Analyst Consensus | Hold | N/A |
Key Risks Facing Kelly Services, Inc. (KELYB)
Key Risks Facing Kelly Services, Inc.
Overview of Internal and External Risks:
The company faces several risks that can impact its financial health. These include:
- Industry Competition: The staffing and workforce solutions industry is highly competitive. The company reported a 7.1% decline in consolidated revenue from services for Q3 2024 compared to Q3 2023, primarily due to competitive pressures and market demand fluctuations.
- Regulatory Changes: Changes in labor laws and regulations can significantly impact operational costs and compliance requirements. The company is subject to various employment regulations across different jurisdictions, which may introduce additional costs or constraints.
- Market Conditions: Economic downturns can lead to reduced demand for staffing services. For instance, the Professional & Industrial segment saw a 7.3% revenue decline year-to-date in 2024, largely due to lower hours volume.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several operational and financial risks:
- Revenue Decline: Year-to-date revenue from services decreased 12.8% in 2024, mainly due to the sale of EMEA staffing operations and lower demand in key segments.
- Asset Impairment Charges: The company recognized asset impairment charges of $5.5 million in 2024, reflecting the impairment of right-of-use assets.
- Increased SG&A Expenses: Despite a decrease in total SG&A expenses by 14.6%, restructuring charges still pose a risk, with $6.4 million recorded in 2024.
Mitigation Strategies:
The company has implemented several strategies to mitigate risks:
- Cost Management Initiatives: The company has undertaken actions to manage costs effectively, reflected in the 14.6% reduction in SG&A expenses.
- Strategic Divestitures: The sale of EMEA staffing operations for $110.6 million in January 2024 is part of a strategy to streamline operations and focus on core segments.
- Acquisition of MRP: The recent acquisition aims to enhance service offerings and revenue streams, contributing $124.6 million to consolidated revenues in Q3 2024.
| Risk Factor | Description | 2024 Impact ($ Million) |
|---|---|---|
| Revenue Decline | Decrease in demand across key segments | -$463.0 |
| Asset Impairment | Right-of-use asset impairment charges | -$5.5 |
| SG&A Expenses | Restructuring charges affecting profitability | -$6.4 |
| Sale of EMEA Operations | Streamlining operations and focusing on core segments | +$110.6 |
| Acquisition of MRP | Enhancing service offerings and revenue | +$124.6 |
Future Growth Prospects for Kelly Services, Inc. (KELYB)
Future Growth Prospects for Kelly Services, Inc.
Key growth drivers for the company include:
- Product Innovations: The Science, Engineering & Technology segment reported a revenue increase of 37.1% in the third quarter of 2024 compared to the same period in 2023, primarily driven by the acquisition of MRP.
- Market Expansions: The Education segment experienced a revenue growth of 10.9% in the third quarter of 2024, reflecting increased demand and higher fill rates.
- Acquisitions: The acquisition of MRP in May 2024 contributed $124.6 million in revenues for the third quarter of 2024.
Future revenue growth projections and earnings estimates indicate:
- Pro forma revenues for the third quarter of 2024 were $1,038.1 million, while for the same quarter in 2023, they were $1,254.0 million.
- Net earnings for the first nine months of 2024 totaled $31.2 million, compared to $25.0 million during the same period in 2023.
Strategic initiatives or partnerships that may drive future growth include:
- Integration of MRP with a focus on aligning company processes, which incurred integration costs of $6.1 million in the third quarter of 2024.
- Expansion of talent solutions, which increased by 6.0% in the third quarter of 2024.
Competitive advantages that position the company for growth are evidenced by:
- Gross profit rate improvements, with the rate increasing to 21.4% in the third quarter of 2024.
- A decrease in total SG&A expenses by 14.6% year-over-year, attributed to proactive resource management and lower variable compensation expenses.
| Segment | Q3 2024 Revenue ($M) | Q3 2023 Revenue ($M) | % Change |
|---|---|---|---|
| Professional & Industrial | 370.4 | 378.0 | (2.0%) |
| Science, Engineering & Technology | 405.2 | 295.7 | 37.1% |
| Education | 142.1 | 128.1 | 10.9% |
| Outsourcing & Consulting | 121.0 | 114.1 | 6.0% |
| International | - | 203.0 | (100.0%) |
| Consolidated Total | 1,038.1 | 1,118.0 | (7.1%) |
Overall, the company is navigating through significant changes, including the impacts of recent acquisitions and divestitures, which are reshaping its revenue streams and operational focus.
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Resources:
- Kelly Services, Inc. (KELYB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Kelly Services, Inc. (KELYB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Kelly Services, Inc. (KELYB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.