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View All NewsKelly’s Q4 revenue falls 10%, but decline is 4% adjusting for APAC deal
Kelly Services Inc. (NASD: KELYA) revenue fell 10.1% in constant currency in the fourth quarter and was down 10.8% as reported. In Kelly’s US operations, revenue fell 4.2%.
Revenue comparisons were unfavorably affected by both an additional week of revenue in fourth quarter 2015 and the transfer of Kelly’s Asia Pacific staffing operations to the TS Kelly Asia Pacific joint venture in July. Fourth-quarter revenue fell 4% year over year in constant currency when adjusted for the Asia Pacific joint venture transaction and was flat when further adjusted for the 53rd week in 2015.
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.
In addition, fourth-quarter revenue fell in Kelly’s Outsourcing and Consulting Group division by 0.7%, or by 0.4% when measured in constant currency. OCG includes recruitment process outsourcing, contingent workforce outsourcing, business process outsourcing, payroll process outsourcing, executive search and career transition/outplacement services. However, gross profit in the RPO portion of the OCG business was up 26% due to revenue growth and a shift in customer mix.
| (US$ millions) | Q4 2016 | Q4 2015 | % change | % constant currency |
| Revenue | $1,304.4 | $1,461.6 | -10.8% | -10.1% |
| Gross profit | $228.0 | $249.5 | -8.6% | -8.1% |
| Gross margin | 17.5% | 17.1% | ||
| Net earnings | $21.6 | $34.2 | -36.8% |
Quote
“Despite the continued softening market demand in Q4, 2016 was a year of progress for Kelly,” said President and CEO Carl Camden. “For the full year, we improved our GP rate, delivered higher year-over-year earnings from operations, and improved our conversion rate — all while adding free cash flow, increasing our quarterly dividend, and ending the year debt-free.”
Revenue by segment
| (US$ millions) | Q4 2016 | Q4 2015 | % change | % constant currency |
| Americas Commercial | $660.4 | $696.1 | -5.1% | -4.7% |
| Americas Professional & Technical | $228.8 | $250.1 | -8.5% | -8.5% |
| EMEA Commerical | $199.1 | $200.5 | -0.7% | 1.7% |
| EMEA Professional & Technical | $42.4 | $44.7 | -5.3% | -3.2% |
| OCG* | $186.1 | $187.5 | -0.7% | -0.4% |
Gross margin by segment
| Q4 2016 | Q4 2015 | |
| Americas Commercial | 16.1% | 15.8% |
| Americas Professional & Technical | 16.8% | 17.2% |
| EMEA Commerical | 13.3% | 13.7% |
| EMEA Professional & Technical | 20.2% | 21.0% |
| OCG* | 26.4% | 25.6% |
*Services in Kelly's Outsourcing and Consulting Group (OCG) includes recruitment process outsourcing (RPO), contingent workforce outsourcing (CWO), business process outsourcing (BPO), payroll process outsourcing (PPO), executive placement and outplacement.
Revenue by geography
| (US$ millions) | Q4 2016 | Q4 2015 | % change | % constant currency |
| Americas | ||||
| United States | $956.7 | $998.8 | -4.2% | -4.2% |
| Canada | $34.5 | $38.0 | -9.3% | -9.7% |
| Mexico | $28.0 | $35.3 | -20.6% | -6.1% |
| Puerto Rico | $18.3 | $24.7 | -25.8% | -25.8% |
| Brazil | $13.3 | $8.7 | 52.2% | 29.4% |
| Europe, Middle East and Africa | ||||
| France | $61.1 | $65.6 | -6.8% | -5.2% |
| Switzerland | $54.3 | $55.5 | -2.1% | -1.0% |
| Portugal | $40.3 | $33.8 | 19.0% | 21.1% |
| Russia | $20.9 | $18.2 | 15.3% | 10.1% |
| United Kingdom | $18.5 | $26.7 | -31.0% | -15.7% |
| Germany | $14.3 | $16.2 | -11.5% | -10.0% |
| Italy | $14.2 | $14.5 | -2.1% | -0.4% |
| Norway | $8.0 | $9.7 | -17.4% | -18.7% |
| Other EMEA | $18.0 | $13.0 | 38.4% | 40.5% |
| Asia Pacific | ||||
| Australia | $3.2 | $31.1 | -89.7% | -90.1% |
| Singapore | $0.2 | $33.0 | -99.5% | -99.5% |
| Malaysia | $0.1 | $14.1 | -98.6% | -98.6% |
| New Zealand | - | $11.2 | -99.5% | -99.6% |
| Other Asia Pacific | $0.5 | $13.5 | -96.6% | -96.5% |
Full-year results
| (US$ millions) | 2016 | 2015 | % change | % constant currency |
| Revenue | $5,276.8 | $5,518.2 | -4.4% | -3.2% |
| Gross profit | $906.3 | $920.3 | -1.5% | -0.5% |
| Gross margin | 17.2% | 16.7% | ||
| Net earnings | $122.6 | $53.8 | 127.8% |
Guidance
Kelly Services forecasts revenue to be either flat or fall by 1% in full-year 2017. Excluding the impact of the Asia Pacific joint venture in the first half of 2016, the company expects revenue to rise 3.0% to 4.0% in 2017.
Share price and market cap
Shares in Kelly Services fell 1.20% to $22.15 in late morning trading. The company had a market cap of $848.41 million, according to Yahoo.