Kelly (NASDAQ: KELYA, KELYB) reported first-quarter revenue rose 9.0% in constant currency; the increase was 7.5% on a reported basis. The world’s eighth-largest staffing firm also today announced it is actively exploring the transition of Kelly and the Kelly brand out of Russia.
Troy, Michigan-based Kelly attributed the revenue gain to increased customer demand compared to the prior-year period, which was impacted by the pandemic, as well as a favorable 310 basis-point impact from the acquisition of Softworld in the second quarter of 2021.
On the flip side, results also include a 230 basis-point negative impact from changes in Mexican staffing market legislation that went into effect last year, and Kelly reported a net loss of $47.6 million in the first quarter compared to net earnings of $25.6 million in the prior-year period.
“We achieved significant year-over-year improvement in revenue; our [gross profit] rate reached its highest level in 25 years; and we more than doubled earnings from operations,” said Kelly President and CEO Peter Quigley. “At the same time, we’re acting quickly to redeploy capital and accelerate inorganic growth.”
The acquisitions of RocketPower in March and Pediatric Therapeutic Services in May both expand Kelly’s presence in high-growth, high-margin specialties, and offer significant opportunities for top-line synergies moving forward, according to Quigley.
First-quarter revenue in the US rose 11.4%.
| (US$ millions) | Q1 2022 | Q1 2021 | % change | % constant currency |
| Revenue | $1,296.4 | $1,205.9 | 7.5% | 9.0% |
| Gross profit | $258.6 | $213.3 | 21.2% | 22.6% |
| Gross margin | 19.9% | 17.7% | ||
| Net earnings (loss) | ($47.6) | $25.6 | nm |
Kelly also created $235 million of liquidity by ending the cross-ownership between Kelly and Persol Holdings and reducing its ownership interest in PersolKelly, the companies’ joint venture in the APAC region.
Revenue by segment
| (US$ millions) | Q1 2022 | Q1 2021 | % change | % constant currency |
| Professional & industrial | $444.3 | $467.6 | -5.0% | -5.0% |
| Science, engineering and technology | $317.1 | $254.7 | 24.5% | 24.6% |
| Education | $173.4 | $111.6 | 55.4% | 55.4% |
| Outsourcing & consulting | $109.1 | $99.3 | 9.8% | 10.5% |
| International | $252.8 | $272.9 | -7.4% | -1.0% |
Revenue by geography
| (US$ millions) | Q1 2022 | Q1 2021 | % change | % constant currency |
| Americas | ||||
| United States | $956.6 | $858.5 | 11.4% | 11.4% |
| Canada | $39.1 | $34.1 | 14.8% | 14.9% |
| Puerto Rico | $27.6 | $24.2 | 14.0% | 14.0% |
| Mexico | $10.3 | $34.6 | -70.1% | -70.0% |
| Europe | ||||
| Switzerland | $55.0 | $52.7 | 4.3% | 6.3% |
| France | $54.6 | $54.3 | 0.6% | 8.0% |
| Portugal | $41.9 | $43.7 | -4.2% | 2.9% |
| Russia | $29.7 | $32.6 | -9.1% | 6.3% |
| Italy | $19.5 | $18.1 | 7.6% | 15.5% |
| UK | $15.0 | $17.0 | -11.9% | -9.3% |
| Other Europe | $36.3 | $27.8 | 30.8% | 40.3% |
| Asia Pacific | ||||
| Total APAC | $10.8 | $8.3 | 29.6% | 35.4% |
Russia Exit
In a statement issued by Quigley today, Kelly announced it has decided to “actively explore an orderly transition of our Russian operations in full compliance with international and local laws.” The decision is based on a review of the environment in Russia and input from stakeholders, including Kelly’s board of directors.
Kelly has provided talent solutions in Russia for more than 25 years. Upon completion of the transition, Kelly and the Kelly brand will no longer have a presence in Russia.
The transition will not affect operations elsewhere, and it is likely that Kelly’s full-time and project-based employees in Russia can continue their employment after the transition.
“The events in Eastern Europe have sent millions of people fleeing from Ukraine into neighboring countries where Kelly’s operations continue uninterrupted,” Quigley wrote. “Our employees continue to support refugees with food, housing, and clothing needs. In addition, Kelly is partnering with a local translation firm to provide free translator services to those in need. And — understanding the crucial role that work plays in families’ lives — we’re engaged with global clients to improve access to employment for people with refugee status.”
Guidance
Kelly forecasts full-year 2022 revenue to be up between 6.0% and 7.0% year over year, up 4.5% and 5.5% organically. Gross margin is expected to be 20.0%. It expects continued structural improvement from higher fee-based business, a continued shift to higher margin specialties and more gradual pace of growth of lower margin specialties.
Share Price and Market Cap
Shares in Kelly were down 1.64% to $17.98 as of 11:56 a.m. Eastern time; they were 13.19% above their 52-week low, according to FT.com. The company had a market cap of $731.47 million.