Kelly Services(KELYA) - 2025 Q4 - Annual Results

Financial Performance - Q4 revenue was $1.2 billion, a decrease of 3.3% year-over-year, but an increase of 4.4% on an organic basis[5] - Adjusted EBITDA for Q4 was$ 43.5 million, up 34% compared to the prior year, with an adjusted EBITDA margin of 3.7%, an increase of 110 basis points[5] - Full-year revenue totaled $4.3 billion, down 10.4% as reported, but up 0.5% on an organic basis[12] - The company reported an operating loss of$ 56.7 million in Q4, primarily due to $80.8 million in non-cash impairment charges[6] - Adjusted operating income for the full year was$ 92.1 million, with adjusted EBITDA of $143.5 million, reflecting a 31% increase year-over-year[12] - Loss per share for Q4 was$ 0.90, compared to earnings per share of $0.31 in the same quarter of 2023[6] - Net earnings turned negative with a loss of$ 0.6 million in 2024, down from a profit of $36.4 million in 2023[20] - Basic earnings per share decreased to$ (0.02) in 2024 from $0.99 in 2023, reflecting a significant decline[20] - Net earnings for Q4 2024 were$ (31.8) million, compared to $11.4 million in Q4 2023, reflecting a significant decline[39] - Adjusted net earnings for Q4 2024 were$ 29.1 million, down from $34.1 million in Q4 2023, indicating a decrease of approximately 14.7%[39] Revenue and Segment Performance - The acquisition of Motion Recruitment Partners contributed 9.8% to Q4 year-over-year revenue growth[6] - Revenue from services decreased to$ 4,331.8 million in 2024 from $4,835.7 million in 2023, a decline of 10.4%[20] - The Science, Engineering & Technology segment saw a revenue increase of 37.9%, rising to$ 396.1 million in 2024 from $287.3 million in 2023[23] - The Professional & Industrial segment reported a revenue increase of 4.4%, reaching$ 384.2 million in 2024 compared to $368.1 million in 2023[23] - Revenue from services decreased by 3.3% year-over-year, totaling$ 1,191.1 million in Q4 2024 compared to $1,232.2 million in Q4 2023[33] - The Americas region saw a revenue increase of 16.2% in Q4 2024, with the United States contributing$ 1,075.5 million, up from $908.7 million in Q4 2023[33] Expenses and Impairments - Gross profit fell to$ 882.6 million in 2024, down from $961.4 million in 2023, representing an 8.2% decrease[20] - The company recorded a goodwill impairment charge of$ 72.8 million in 2024, with no such charge in 2023[23] - Goodwill impairment charges amounted to $72.8 million in Q4 2024, impacting overall earnings from operations[37] - The company reported a goodwill impairment charge of$ 54.4 million in Q4 2024, which significantly impacted net earnings[39] - Total SG&A expenses decreased to $818.4 million in 2024 from$ 934.7 million in 2023, a reduction of 12.4%[20] Cash Flow and Assets - Year-to-date free cash flow for 2024 was $15.8 million, a decrease from$ 61.4 million in 2023[29] - Free cash flow for 2024 was $15.8 million, down from$ 61.4 million in 2023, showing a decline of approximately 74.3%[43] - Total assets increased to $2,632.3 million in 2024 from$ 2,581.6 million in 2023, representing a growth of 2.0%[29] - Total current liabilities decreased to $826.5 million in 2024 from$ 1,019.9 million in 2023, a reduction of 18.9%[29] - The company reported a current ratio of 1.7 in 2024, indicating improved liquidity compared to 1.6 in 2023[29] - Total stockholders' equity decreased to $1,234.6 million in 2024 from$ 1,253.7 million in 2023, reflecting a decline of 1.5%[29] Future Outlook and Strategic Initiatives - The company expects incremental organic revenue growth and adjusted EBITDA margin expansion during fiscal 2025[5] - The company plans to focus on market expansion and new product development to drive future growth despite recent challenges[30] - The planned retirement of CEO Peter Quigley by the end of 2025 has been announced, with a search for his successor underway[9] Tax and Other Charges - The effective income tax rate increased to 97.1% in 2024 from (46.5%) in 2023, indicating a significant change in tax impact[20] - Total income tax expense for Q4 2024 was $(23.8) million, compared to$ (6.5) million in Q4 2023, indicating a higher tax benefit[39] - The 2023 tax adjustments related to the sale of EMEA staffing operations included a $19.1 million valuation allowance for deferred tax assets in the U.K.[56] Integration and Restructuring - The company incurred integration costs of$ 2.9 million in Q4 2024, compared to no such costs in Q4 2023[39] - The integration costs in 2024 are associated with the MRP acquisition and aligning processes across the company[49] - Restructuring charges for 2024 include $3.0 million of severance and$ 3.1 million for transformation execution, while 2023 restructuring charges totaled $17.7 million for transformation costs and$ 11.6 million for severance[53] - The restructuring initiative started in Q2 2023 aims to enhance organizational efficiency and effectiveness[53]