Daily News
View All NewsKelly’s Q3 revenue falls 7% in constant currency
Kelly Services Inc. (NASD: KELYA) revenue fell 7.6% in the third quarter, or 7.1% in constant currency. Americas revenue fell 1.3% in constant currency.
Gross margin improved to 17.2% from 16.9%, due to improving gross margins in the Americas Staffing and global OCG businesses as well as the favorable impact related to the APAC deconsolidation, as APAC had lower GP rates than the Company average.
Kelly on July 4 transferred its APAC staffing operations to the TS Kelly Asia Pacific joint venture and recorded a gain of $87.2 million. Kelly retains 49% ownership of the newly formed joint venture with Japanese staffing giant Temp Holdings, which Kelly expects to be one of the region’s largest workforce solutions providers. Excluding the APAC staffing operations from the third quarter of 2015, adjusted 2016 third quarter revenue edged down 0.7% year over year, or a 0.1% decrease on a constant currency basis.
| (US$ millions) | Q3 2016 | Q3 2015 | % change | % constant currency |
| Revenue | $1,247.8 | $1,351.0 | -7.6% | -7.1% |
| Gross profit | $215.1 | $228.2 | -5.8% | -5.3% |
| Gross margin | 17.2% | 16.9% | ||
| Net earnings | $80.9 | $9.1 | nm |
Quote
“Sorting through the financial complexity around the JV transaction, Kelly's third quarter performance reflects good operating leverage on basically flat revenue,” said President and CEO Carl Camden. “We increased our gross profit rate, reduced expenses, and turned in healthy operating earnings and solid returns for our shareholders. Our US Staffing segment showed competitive strength and agility in an uncertain economic environment, and our OCG business delivered year-over-year GP improvement. With the APAC JV now firmly in place, we are operating as a more focused, disciplined company relentlessly committed to profitability.”
Revenue by segment
| (US$ millions) | Q3 2016 | Q3 2015 | % change | % constant currency |
| Americas Commercial | $603.7 | $615.5 | -1.9% | -1.3% |
| Americas Professional & Technical | $239.6 | $242.8 | -1.3% | -1.3% |
| EMEA Commercial | $197.6 | $199.0 | -0.8% | 1.0% |
| EMEA Professional & Technical | $41.7 | $43.6 | -4.3% | -2.9% |
| OCG* | $178.2 | $171.8 | 3.7% | 3.9% |
Gross margin by segment
| Q3 2016 | Q3 2015 | |
| Americas Commercial | 15.7% | 15.7% |
| Americas Professional & Technical | 17.3% | 16.9% |
| EMEA Commercial | 13.6% | 13.9% |
| EMEA Professional & Technical | 19.9% | 21.6% |
| OCG* | 25.2% | 24.1% |
*Services in Kelly's Outsourcing and Consulting Group (OCG) includes recruitment process outsourcing (RPO), contingent workforce outsourcing (CWO), business process outsourcing (BPO), payroll process outsourcing (PPO), executive placement and outplacement.
Revenue by geography
| (US$ millions) | Q3 2016 | Q3 2015 | % change | % constant currency |
| Americas | ||||
| United States | $900.3 | $899.8 | 0.1% | 0.1% |
| Canada | $34.9 | $37.9 | -7.8% | -8.5% |
| Mexico | $27.6 | $31.3 | -12.3% | 0.4% |
| Puerto Rico | $20.9 | $23.8 | -12.2% | -12.2% |
| Brazil | $13.3 | $10.4 | 27.9% | 28.1% |
| Europe, Middle East and Africa | ||||
| France | $60.8 | $63.1 | -3.7% | -4.1% |
| Switzerland | $55.0 | $58.0 | -5.2% | -3.9% |
| Portugal | $39.2 | $33.5 | 16.9% | 16.5% |
| United Kingdom | $19.5 | $27.7 | -29.3% | -16.4% |
| Russia | $18.4 | $17.0 | 7.9% | 11.2% |
| Germany | $14.2 | $15.4 | -7.7% | -8.1% |
| Italy | $13.6 | $14.0 | -2.8% | -3.1% |
| Norway | $8.4 | $10.1 | -17.3% | -15.9% |
| Other EMEA | $17.4 | $11.5 | 50.8% | 50.3% |
| Asia Pacific | ||||
| Singapore | $0.1 | $32.6 | -99.7% | -99.7% |
| Australia | $3.6 | $28.8 | -87.5% | -88.0% |
| Malaysia | $0.1 | $14.0 | -99.5% | -99.5% |
| New Zealand | $0.1 | $9.4 | -99.1% | -99.2% |
| Other Asia Pacific | $0.4 | $12.7 | -96.5% | -96.4% |
Guidance
Kelly Services forecast fourth-quarter revenue will fall between 9% and 10% year over year in constant currency. Excluding the impact of the APAC joint venture, revenue in the company will 2.0% to 3.0% in constant currency, or flat year over year excluding the 53rd week in 2015.
Share price and market cap
Shares in Kelly Services rose 1.39% to $18.98 in late morning trading. The company had a market cap of $723.17 million, according to Yahoo.