Kelly to Participate in the 15th Annual Barrington Research Virtual Fall Conference

Research, News, and Market Data on Kelly

August 31, 2022

TROY, Mich., 
Aug. 31, 2022 /PRNewswire/ — 
Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced it will participate in the 15th Annual 
Barrington Research Virtual Fall Conference on 
Thursday, September 8, 2022.

Peter Quigley , president and CEO,  Olivier Thirot , executive vice president and chief financial officer, and  James Polehna , chief investor relations officer and corporate secretary, will participate in virtual one-on-one meetings. A copy of Kelly’s investor presentation is also available at kellyservices.com.

About Kelly®

Kelly Services, Inc.
 (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

ANALYST & MEDIA CONTACT:
James Polehna
(248) 244-4586
james.polehna@kellyservices.com

 

Image Credit: NASA HQ Photo (Flickr)

Musk Confounds Experts in Corporate Governance Best Practices

According to the Chartered Governance Institute, “Good quality, ethical decision-making builds sustainable businesses and enables them to create long-term value more effectively.” So it’s no surprise that the head of start-up Neuralink (Elon Musk) has caused so many governance experts to try to wrap their brains around the decision he and a coworker made to have children together.

Often referred to as the richest man in the world, co-founder of Paypal (PYPL), SpaceX owner, Tesla (TSLA) CEO, and Boring Company President, Elon Musk has proven himself successful at managing unique companies through its growth phase. He’s respected worldwide, and a single snarky tweet from the South African-born American is powerful enough to change the fortunes of investors in crypto and some stocks.

Lately, the 51-year-old has been the subject of debate among those that report on company ESG (environmental, social, governance) standards. No, not because he smoked pot on The Joe Rogan Show, although in his role at SpaceX, the government did have some questions. This debate began after he and a direct report at Neuralink became the parents of twins back in November 2021. Neuralink is a less-known Musk creation with about 300 employees. It is developing chips that connect the human brain directly to machines.

The director-level subordinate has reportedly told coworkers that she was not and is not involved romantically with the boss. She has told them the children with Musk were conceived through in-vitro fertilization (IVF).

To avoid possible conflicts of interest, Neuralink’s employee handbook prohibits dating, “personal relationships,” and “close personal friendships” between employees in a direct supervisory dynamic. This is common language in employees’ agreements with their employer. It’s also considered best practice in corporate governance for those in significant management positions. It’s not uncommon for a “fling” to cost a CEO, or subordinate their job. The chief concern is conflicts of interest, putting the company and its investors first.

Musk Again Has Found a Different Path

But the reported circumstances surrounding the Neuralink babies are so unusual that Reuters reached out to corporate governance counselors and asked them to review the company policy and circumstances presented by the two involved. This is clearly a situation with many gray areas. There was no agreement amongst the experts, as with many other things that mix business and personal ethics.

Nell Minow, vice chair of corporate governance consultancy ValueEdge Advisors, told Reuters about the Code of Conduct, “Whatever lawyer wrote this language did not contemplate this situation.” Adding the facts appeared to “fall between the cracks” of the policy’s intent to avoid conflicts of interest due to worker relationships.

Four of the corporate governance experts said they believed the two producing children, even through IVF, is a “personal relationship” or “close friendship,” which Neuralink’s code of conduct requires to be disclosed to a “people operations manager.”  The code does not define a “close friendship” but defines a personal relationship as one where the individuals have a “continuing relationship of a romantic or intimate nature and who are not married to each other.”

Gabriel Rauterberg, a corporate law professor at the University of Michigan, told Reuters, “You’re layering intimate familial bonds over professional relationships,” he explained, “There is always the worry that someone with greater power will use their professional power in ways that are inappropriate.”

The remaining five corporate governance aficionados either did not think the parents’ arrangement was a breach under the Neuralink policy or were stumped by how far outside the box it was for them.

Joan Heminway, a business professor at the University of Tennessee’s law school, pointed out that one can’t demonstrate that the coworkers are close personally, despite the IVF matter, she said, “That’s the new wrench here.”

Usha Rodrigues, a professor at the University of Georgia’s law school, said the matter “may fall under ‘close friendship’ if there is an ongoing, co-parenting type relationship, but that is subject to interpretation.”

 

Business as “Usual”

The extent of Musk’s involvement in the life of his young twins is unclear. A court filing shows they asked for the children to take his last name; the parents also listed the same address in Texas.

Neuralink has accepted the new mom’s description that it is a non-romantic relationship, and she continues in her role as director of operations and special projects. The two still function as a team inside the workplace, each running internal and external meetings. 

Take Away

It’s difficult not to have an opinion on whether non-romantic parenting is an intimate relationship between coworkers or if such a policy is good corporate governance. Perhaps it is a policy that serves one company best yet would be a disaster imposed on another.

We’d like to know what you think. Leave a comment under this article on Channelchek’s Twitter account, and hit the “Follow” button while you’re there.

Paul Hoffman

Managing Editor, Channelchek

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Sources

https://www.cgi.org.uk/about-us/policy/what-is-corporate-governance

https://www.reuters.com/business/musk-tests-limits-governance-by-having-children-with-aide-2022-08-26/

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Kelly Reports Second-Quarter 2022 Earnings

Research, News, and Market Data on Kelly

Kelly Reports Second-Quarter
2022 Earnings

August 11, 2022

• Q2 revenue up 0.7% from a
  year ago; 2.7% in constant currency
• Q2 operating earnings of $8.2
  million and earnings per share of $0.06 down
  from a year ago primarily due to a non-cash impairment charge related to
  our operations in Russia
• Adjusted operating earnings
  of $22.3 million; up
  63% from a year ago
• Completed the acquisition
  of Pediatric Therapeutic Services in May to extend our leading position in
  K-12 education

TROY, Mich., 
Aug. 11, 2022 /PRNewswire/ — 
Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced results for the second quarter of 2022.

Peter Quigley , president and chief executive officer, announced revenue for the second quarter of 2022 totaled 
$1.3 billion, a 0.7% increase, or 2.7% in constant currency, compared to the corresponding quarter of 2021. Revenue improved year-over-year in the quarter reflecting increased customer demand compared to the COVID-19-impacted prior year period, as well as the impact of the recent acquisitions of RocketPower, a recruitment process outsourcing firm, and Pediatric Therapeutic Services, a specialty firm providing in-school therapy services.

Earnings from operations in the second quarter of 2022 totaled 
$8.2 million
, compared to 
$13.7 million
 reported in the second quarter of 2021. Earnings in the second quarter of 2022 include an asset impairment charge related to our decision to transition our business in 
Russia and a gain on sale of assets related to the disposition of under-utilized real property located in 
the United States. Excluding those items, adjusted earnings from operations were 
$22.3 million compared to 
$13.7 million in the second quarter of 2021. Earnings improved as a result of revenue growth combined with structural improvement in gross profit rate and expense leverage.

Earnings per share in the second quarter of 2022 were 
$0.06 compared to earnings per share of 
$0.60 in the second quarter of 2021. Included in the earnings per share in the second quarter of 2022 is a 
$0.48 per share asset impairment charge, net of tax, related to our decision to transition our business in 
Russia and an 
$0.08 per share gain on sale of assets, net of tax, related to the disposition of under-utilized real property located in 
the United States. Included in the second quarter of 2021 is earnings per share of 
$0.11 gain, net of tax, related to non-cash gains, net of tax, on 
Persol Holding
 common shares. On an adjusted basis, earnings per share were 
$0.45 in the second quarter of 2022 compared to 
$0.49 in the corresponding quarter of 2021. Adjusted earnings per share in the second quarter of 2022 declined as a result of higher 2022 tax expense compared to the same period in 2021.

“We saw solid demand for Kelly’s specialties in the second quarter and, importantly, we are successfully translating revenue into strong gross profit growth. We drove significant improvement in our gross profit rate year over year, due to our continued positive shift in business mix toward higher-margin products and specialties boosted by our specialty acquisitions,” said Quigley. “We have significant capital available to enable growth, and we are putting that capital to work to drive shareholder value. While there is some economic uncertainty in the second half of the year, we are confident that our focused and well-capitalized specialization strategy will continue to deliver value in 2022 and beyond.”

Kelly also reported that on 
August 10, its board of directors declared a dividend of 
$0.075 per share. The dividend is payable on 
September 7, 2022 to stockholders of record as of the close of business on 
August 24, 2022.

In conjunction with its second-quarter earnings release, Kelly has published a financial presentation on the Investor Relations page of its public website and will host a conference call at 
9 a.m. ET on August 11 to review the results and answer questions. The call may be accessed in one of the following ways:

Via the Internet:
Kellyservices.com

Via the Telephone
(877) 692-8955 (toll free) or (234) 720-6979 (caller paid)
Enter access code 5728672
After the prompt, please enter “#”

A recording of the conference call will be available after 
2:30 p.m. ET on 
August 11, 2022
, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 8237932#. The recording will also be available at kellyservices.com during this period.

This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These factors include, but are not limited to, changing market and economic conditions, the impact of the novel coronavirus (COVID-19) outbreak, competitive market pressures including pricing and technology introductions and disruptions, disruption in the labor market and weakened demand for human capital resulting from technological advances, competition law risks, the impact of changes in laws and regulations (including federal, state and international tax laws), unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, or the risk of additional tax liabilities in excess of our estimates, our ability to achieve our business strategy, our ability to successfully develop new service offerings, material changes in demand from or loss of large corporate customers as well as changes in their buying practices, risks particular to doing business with government or government contractors, the risk of damage to our brand, our exposure to risks associated with services outside traditional staffing, including business process outsourcing, services of licensed professionals and services connecting talent to independent work, our increasing dependency on third parties for the execution of critical functions, our ability to effectively implement and manage our information technology strategy, the risks associated with past and future acquisitions, including risk of related impairment of goodwill and intangible assets, risks associated with conducting business in foreign countries, including foreign currency fluctuations, risks associated with violations of anti-corruption, trade protection and other laws and regulations, availability of qualified full-time employees, availability of temporary workers with appropriate skills required by customers, liabilities for employment-related claims and losses, including class action lawsuits and collective actions, our ability to sustain critical business applications through our key data centers, risks arising from failure to preserve the privacy of information entrusted to us or to meet our obligations under global privacy laws, the risk of cyberattacks or other breaches of network or information technology security, our ability to realize value from our tax credit and net operating loss carryforwards, our ability to maintain specified financial covenants in our bank facilities to continue to access credit markets, and other risks, uncertainties and factors discussed in this release and in the Company’s filings with the 
Securities and Exchange Commission. Actual results may differ materially from any forward-looking statements contained herein, and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

About Kelly®

Kelly Services, Inc.
 (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

MEDIA CONTACT:			ANALYST CONTACT:
Jane Stehney			James Polehna
(248) 765-6864			(248) 244-4586
stehnja@kellyservices.com			james.polehna@kellyservices.com

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 13 WEEKS ENDED JULY 3, 2022 AND JULY 4, 2021
(UNAUDITED)
(In millions of dollars except per share data)
								%		CC %
		2022		2021		Change		Change		Change
Revenue from services	$	1,267.3	$	1,258.1	$	9.2		0.7	%	2.7	%
Cost of services		1,004.9		1,027.1		(22.2)		(2.2)
Gross profit		262.4		231.0		31.4		13.6		15.6
Selling, general and administrative expenses		240.1		217.3		22.8		10.6		12.3
Impairment of assets held for sale		18.5		—		18.5		NM
Gain on sale of assets		(4.4)		—		(4.4)		NM
Earnings from operations		8.2		13.7		(5.5)		(40.6)
Gain on investment in Persol Holdings		—		6.3		(6.3)		NM
Other expense, net		(1.1)		(0.3)		(0.8)		(350.6)
Earnings before taxes and equity in net earnings (loss) of affiliate		7.1		19.7		(12.6)		(64.1)
Income tax expense (benefit)		4.9		(2.6)		7.5		282.9
Net earnings before equity in net earnings (loss) of affiliate		2.2		22.3		(20.1)		(90.1)
Equity in net earnings (loss) of affiliate		—		1.7		(1.7)		NM
Net earnings	$	2.2	$	24.0	$	(21.8)		(90.8)
Basic earnings  per share	$	0.06	$	0.60	$	(0.54)		(90.0)
Diluted earnings per share	$	0.06	$	0.60	$	(0.54)		(90.0)
STATISTICS:
Permanent placement revenue (included in revenue from services)	$	24.8	$	18.6	$	6.2		33.2	%	36.3	%
Gross profit rate		20.7	%	18.4	%	2.3	pts.
Conversion rate		3.1	%	5.9	%	(2.8)	pts.
Adjusted EBITDA	$	31.7	$	22.2	$	9.5
Adjusted EBITDA margin		2.5	%	1.8	%	0.7	pts.
Effective income tax rate		68.8	%	(13.5)	%	82.3	pts.
Average number of shares outstanding (millions):
Basic		37.9		39.4
Diluted		38.2		39.5

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 26 WEEKS ENDED JULY 3, 2022 AND JULY 4, 2021
(UNAUDITED)
(In millions of dollars except per share data)
								%		CC %
		2022		2021		Change		Change		Change
Revenue from services	$	2,563.7	$	2,464.0	$	99.7		4.0	%	5.8	%
Cost of services		2,042.7		2,019.7		23.0		1.1
Gross profit		521.0		444.3		76.7		17.3		19.0
Selling, general and administrative expenses		476.2		420.0		56.2		13.4		14.8
Impairment of assets held for sale		18.5		—		18.5		NM
Gain on sale of assets		(5.3)		—		(5.3)		NM
Earnings from operations		31.6		24.3		7.3		29.8
Gain (loss) on investment in Persol Holdings		(67.2)		36.3		(103.5)		NM
Loss on currency translation from liquidation of subsidiary(1)		(20.4)		—		(20.4)		NM
Other income (expense), net		1.7		(3.7)		5.4		147.2
Earnings (loss) before taxes and equity in net earnings (loss) of affiliate		(54.3)		56.9		(111.2)		NM
Income tax expense (benefit)		(8.1)		7.9		(16.0)		(204.0)
Net earnings (loss) before equity in net earnings (loss) of affiliate		(46.2)		49.0		(95.2)		NM
Equity in net earnings (loss) of affiliate		0.8		0.6		0.2		35.7
Net earnings (loss)	$	(45.4)	$	49.6	$	(95.0)		NM
Basic earnings (loss) per share	$	(1.19)	$	1.25	$	(2.44)		NM
Diluted earnings (loss) per share	$	(1.19)	$	1.25	$	(2.44)		NM
STATISTICS:
Permanent placement revenue (included in revenue from services)	$	51.4	$	34.6	$	16.8		48.5	%	51.4	%
Gross profit rate		20.3	%	18.0	%	2.3	pts.
Conversion rate		6.1	%	5.5	%	0.6	pts.
Adjusted EBITDA	$	62.4	$	39.1	$	23.3
Adjusted EBITDA margin		2.4	%	1.6	%	0.8	pts.
Effective income tax rate		15.0	%	13.8	%	1.2	pts.
Average number of shares outstanding (millions):
Basic		38.3		39.4
Diluted		38.3		39.5

 

(1)

Subsequent to the sale of the Persol Holdings investment, the Company commenced the dissolution process of the Kelly Services Japan subsidiary, which was considered substantially liquidated as of the first quarter-end 2022, resulting in the recognition of the  $20.4 million  loss on currency translation from liquidation of this subsidiary in the first quarter of 2022.

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
		Second Quarter
							%		CC %
		2022			2021		Change		Change
Professional & Industrial
Revenue from services	$	415.8		$	466.5		(10.9)	%	(10.6)	%
Gross profit		77.8			75.2		3.6		3.9
Total SG&A expenses		67.4			69.0		(2.2)		(2.0)
Earnings (loss) from operations		10.4			6.2		68.6
Gross profit rate		18.7	%		16.1	%	2.6	pts.
Science, Engineering & Technology
Revenue from services	$	324.3		$	298.2		8.7	%	9.0	%
Gross profit		75.2			66.5		13.1		13.3
Total SG&A expenses		54.8			46.9		16.9		17.1
Earnings (loss) from operations		20.4			19.6		3.8
Gross profit rate		23.2	%		22.3	%	0.9	pts.
Education
Revenue from services	$	155.5		$	105.9		46.8	%	46.8	%
Gross profit		26.0			16.8		55.0		55.0
Total SG&A expenses		20.4			15.3		33.4		33.4
Earnings (loss) from operations		5.6			1.5		278.6
Gross profit rate		16.7	%		15.8	%	0.9	pts.
Outsourcing & Consulting
Revenue from services	$	124.4		$	107.3		16.0	%	17.3	%
Gross profit		46.2			34.8		32.8		35.3
Total SG&A expenses		39.8			30.1		32.5		34.5
Earnings (loss) from operations		6.4			4.7		34.5
Gross profit rate		37.2	%		32.5	%	4.7	pts.
International
Revenue from services	$	247.6		$	280.4		(11.7)	%	(4.3)	%
Gross profit		37.2			37.7		(1.5)		7.3
Total SG&A expenses		34.6			34.6		(0.1)		8.2
Earnings (loss) from operations		2.6			3.1		(16.3)
Gross profit rate		15.0	%		13.4	%	1.6	pts.

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
		June Year to Date
							%		CC %
		2022			2021		Change		Change
Professional & Industrial
Revenue from services	$	860.1		$	934.1		(7.9)	%	(7.8)	%
Gross profit		160.9			151.1		6.5		6.7
Total SG&A expenses		138.8			138.4		0.3		0.4
Earnings (loss) from operations		22.1			12.7		74.2
Gross profit rate		18.7	%		16.2	%	2.5	pts.
Science, Engineering & Technology
Revenue from services	$	641.4		$	552.9		16.0	%	16.2	%
Gross profit		149.0			119.7		24.5		24.7
Total SG&A expenses		108.0			82.6		30.8		30.9
Earnings (loss) from operations		41.0			37.1		10.5
Gross profit rate		23.2	%		21.6	%	1.6	pts.
Education
Revenue from services	$	328.9		$	217.5		51.2	%	51.2	%
Gross profit		52.6			34.0		54.9		54.9
Total SG&A expenses		39.0			29.5		32.4		32.4
Earnings (loss) from operations		13.6			4.5		203.1
Gross profit rate		16.0	%		15.6	%	0.4	pts.
Outsourcing & Consulting
Revenue from services	$	233.5		$	206.6		13.0	%	14.1	%
Gross profit		83.5			66.1		26.3		28.2
Total SG&A expenses		74.1			58.5		26.7		28.2
Earnings (loss) from operations		9.4			7.6		23.1
Gross profit rate		35.8	%		32.0	%	3.8	pts.
International
Revenue from services	$	500.4		$	553.3		(9.5)	%	(2.7)	%
Gross profit		75.0			73.4		2.1		10.0
Total SG&A expenses		67.8			67.7		0.2		7.4
Earnings (loss) from operations		7.2			5.7		25.7
Gross profit rate		15.0	%		13.3	%	1.7	pts.

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
		July 3, 2022		January 2, 2022		July 4, 2021
Current Assets
Cash and equivalents	$	133.9	$	112.7	$	64.4
Trade accounts receivable, less allowances of
$12.0,  $12.6, and  $12.5, respectively		1,497.9		1,423.2		1,362.5
Prepaid expenses and other current assets		80.6		52.8		82.4
Assets held for sale		24.6		—		—
Total current assets		1,737.0		1,588.7		1,509.3
Noncurrent Assets
Property and equipment, net		25.4		35.3		37.7
Operating lease right-of-use assets		70.1		75.8		83.2
Deferred taxes		298.3		302.8		302.9
Goodwill, net		192.1		114.8		114.8
Investment in Persol Holdings		—		264.3		187.7
Investment in equity affiliate		—		123.4		120.0
Other assets		412.3		389.1		391.3
Total noncurrent assets		998.2		1,305.5		1,237.6
Total Assets	$	2,735.2	$	2,894.2	$	2,746.9
Current Liabilities
Short-term borrowings	$	—	$	—	$	0.1
Accounts payable and accrued liabilities		734.7		687.2		612.6
Operating lease liabilities		15.3		17.5		19.6
Accrued payroll and related taxes		322.4		318.4		337.0
Accrued workers’ compensation and other claims		24.4		20.8		22.0
Income and other taxes		50.5		51.3		62.6
Liabilities held for sale		13.7		—		—
Total current liabilities		1,161.0		1,095.2		1,053.9
Noncurrent Liabilities
Operating lease liabilities		57.7		61.4		67.1
Accrued payroll and related taxes		—		57.6		58.5
Accrued workers’ compensation and other claims		43.4		37.0		40.8
Accrued retirement benefits		180.2		220.0		214.6
Other long-term liabilities		16.0		86.8		68.2
Total noncurrent liabilities		297.3		462.8		449.2
Stockholders’ Equity
Common stock		38.5		40.1		40.1
Treasury stock		(12.5)		(15.1)		(15.3)
Paid-in capital		24.9		23.9		22.3
Earnings invested in the business		1,239.2		1,315.0		1,212.5
Accumulated other comprehensive income (loss)		(13.2)		(27.7)		(15.8)
Total stockholders’ equity		1,276.9		1,336.2		1,243.8
Total Liabilities and Stockholders’ Equity	$	2,735.2	$	2,894.2	$	2,746.9
STATISTICS:
Working Capital	$	576.0	$	493.5	$	455.4
Current Ratio		1.5		1.5		1.4
Debt-to-capital %		0.0	%	0.0	%	0.0	%
Global Days Sales Outstanding		63		60		60
Year-to-Date Free Cash Flow	$	(110.8)	$	73.8	$	42.7

               

 

KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WEEKS ENDED JULY 3, 2022 AND JULY 4, 2021
(UNAUDITED)
(In millions of dollars)
		2022		2021
Cash flows from operating activities:
Net earnings (loss)	$	(45.4)	$	49.6
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Impairment of assets held for sale		18.5		—
Depreciation and amortization		16.1		14.1
Operating lease asset amortization		9.8		10.7
Provision for credit losses and sales allowances		1.3		—
Stock-based compensation		3.8		2.8
(Gain) loss on investment in Persol Holdings		67.2		(36.3)
Loss on currency translation from liquidation of subsidiary		20.4		—
Gain on foreign currency remeasurement		(5.5)		—
Gain on sale of assets		(5.3)		—
Equity in net (earnings) loss of  PersolKelly Pte. Ltd.		(0.8)		(0.6)
Other, net		2.9		2.2
Changes in operating assets and liabilities, net of acquisitions		(190.3)		5.1
Net cash (used in) from operating activities		(107.3)		47.6
Cash flows from investing activities:
Capital expenditures		(3.5)		(4.9)
Proceeds from sale of assets		4.5		—
Acquisition of companies, net of cash received		(143.1)		(219.0)
Proceeds from company-owned life insurance		1.5		10.4
Proceeds from sale of Persol Holdings investment		196.9		—
Proceeds from sale of equity method investment		119.5		—
Proceeds related to loans with equity affiliate		—		5.8
Proceeds from equity securities		—		5.0
Other investing activities		(0.2)		1.0
Net cash from (used in) investing activities		175.6		(201.7)
Cash flows from financing activities:
Net change in short-term borrowings		—		(0.1)
Financing lease payments		(0.4)		(0.3)
Dividend payments		(4.8)		—
Payments of tax withholding for stock awards		(0.8)		(0.6)
Buyback of common shares		(27.2)		—
Contingent consideration payments		(0.7)		—
Net cash used in financing activities		(33.9)		(1.0)
Effect of exchange rates on cash, cash equivalents and restricted cash		0.1		(2.3)
Net change in cash, cash equivalents and restricted cash		34.5		(157.4)
Cash, cash equivalents and restricted cash at beginning of period		119.5		228.1
Cash, cash equivalents and restricted cash at end of period	$	154.0	$	70.7

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES BY GEOGRAPHY
(UNAUDITED)
(In millions of dollars)
		Second Quarter
						%		CC %
		2022		2021		Change		Change
Americas
United States	$	928.9	$	894.6		3.8	%	3.8	%
Canada		40.3		39.5		1.8		6.0
Puerto Rico		28.9		26.9		7.7		7.7
Mexico		11.2		33.1		(66.3)		(66.2)
Total Americas Region		1,009.3		994.1		1.5		1.7
Europe
Switzerland		55.3		54.0		2.4		8.7
France		50.4		57.5		(12.4)		(0.7)
Portugal		42.0		40.6		3.5		17.3
Russia		28.7		33.7		(14.6)		(24.6)
Italy		18.4		19.4		(5.4)		7.4
United Kingdom		16.0		17.7		(9.6)		1.0
Other		35.7		31.8		12.1		28.3
Total Europe Region		246.5		254.7		(3.2)		5.4
Total Asia-Pacific Region		11.5		9.3		24.2		32.1
Total Kelly Services, Inc.	$	1,267.3	$	1,258.1		0.7	%	2.7	%

               

 

KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES BY GEOGRAPHY
(UNAUDITED)
(In millions of dollars)
		June Year to Date
						%		CC %
		2022		2021		Change		Change
Americas
United States	$	1,885.5	$	1,753.1		7.6	%	7.6	%
Canada		79.4		73.6		7.8		10.1
Puerto Rico		56.5		51.1		10.7		10.7
Mexico		21.5		67.7		(68.3)		(68.1)
Total Americas Region		2,042.9		1,945.5		5.0		5.1
Europe
Switzerland		110.3		106.7		3.4		7.5
France		105.0		111.8		(6.1)		3.6
Portugal		83.9		84.3		(0.5)		9.9
Russia		58.4		66.3		(11.9)		(9.4)
Italy		37.9		37.5		0.8		11.3
United Kingdom		31.0		34.7		(10.7)		(4.0)
Other		72.0		59.6		20.8		33.9
Total Europe Region		498.5		500.9		(0.5)		7.4
Total Asia-Pacific Region		22.3		17.6		26.7		33.7
Total Kelly Services, Inc.	$	2,563.7	$	2,464.0		4.0	%	5.8	%

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
SECOND QUARTER
(UNAUDITED)
(In millions of dollars)
	2022								2021
Earnings (loss) from Operations:	As Reported		Gain on sale of assets(3)		Impairment of assets held for sale(4)		Adjusted		As Reported
Professional & Industrial	$                  10.4		$                     —		$                     —		$                  10.4		$                    6.2
Science, Engineering & Technology	20.4		—		—		20.4		19.6
Education	5.6		—		—		5.6		1.5
Outsourcing & Consulting	6.4		—		—		6.4		4.7
International	2.6		—		—		2.6		3.1
Corporate	(23.1)		—		—		(23.1)		(21.4)
Impairment of assets held for sale	(18.5)		—		18.5		—		—
Gain on sale of assets	4.4		(4.4)		—		—		—
Total Company	$                    8.2		$                   (4.4)		$                  18.5		$                  22.3		$                  13.7

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
JUNE YEAR TO DATE
(UNAUDITED)
(In millions of dollars)
	2022								2021
Earnings (loss) from Operations:	As Reported		Gain on sale of assets(3)		Impairment of assets held for sale(4)		Adjusted		As Reported
Professional & Industrial	$                  22.1		$                     —		$                     —		$                  22.1		$                  12.7
Science, Engineering & Technology	41.0		—		—		41.0		37.1
Education	13.6		—		—		13.6		4.5
Outsourcing & Consulting	9.4		—		—		9.4		7.6
International	7.2		—		—		7.2		5.7
Corporate	(48.5)		—		—		(48.5)		(43.3)
Impairment of assets held for sale	(18.5)		—		18.5		—		—
Gain on sale of assets	5.3		(5.3)		—		—		—
Total Company	$                  31.6		$                  (5.3)		$                  18.5		$                  44.8		$                  24.3

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars except per share data)
		Second Quarter				June Year to Date
		2022		2021		2022		2021
Income tax expense (benefit)		$                      4.9		$                     (2.6)		$                     (8.1)		$                      7.9
Taxes on investment in Persol Holdings(1)		—		(1.9)		18.4		(11.1)
Taxes on foreign currency matters(2)		—		—		(1.5)		—
Taxes on gain on sale of assets(3)		(1.1)		—		(1.3)		—
Taxes on impairment of assets held for sale(4)		—		—		—		—
Adjusted income tax expense (benefit)		$                      3.8		$                     (4.5)		$                      7.5		$                     (3.2)
		Second Quarter				June Year to Date
		2022		2021		2022		2021
Net earnings (loss)		$                      2.2		$                    24.0		$                  (45.4)		$                    49.6
(Gain) loss on investment in Persol Holdings, net of taxes(1)		—		(4.4)		48.8		(25.2)
Loss on foreign currency matters, net of taxes(2)		—		—		16.4		—
Gain on sale of assets, net of taxes(3)		(3.3)		—		(4.0)		—
Impairment of assets held for sale, net of taxes(4)		18.5		—		18.5		—
Adjusted net earnings		$                    17.4		$                    19.6		$                    34.3		$                    24.4
		Second Quarter				June Year to Date
		2022		2021		2022		2021
		Per Share				Per Share
Net earnings (loss)		$                    0.06		$                    0.60		$                  (1.19)		$                    1.25
(Gain) loss on investment in Persol Holdings, net of taxes(1)		—		(0.11)		1.27		(0.63)
Loss on foreign currency matters, net of taxes(2)		—		—		0.43		—
Gain on sale of assets, net of taxes(3)		(0.08)		—		(0.10)		—
Impairment of assets held for sale, net of taxes(4)		0.48		—		0.48		—
Adjusted net earnings		$                    0.45		$                    0.49		$                    0.90		$                    0.61
Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.

 

 

KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars)
	Second Quarter				June Year to Date
	2022		2021		2022		2021
Net earnings (loss)	$                  2.2		$                24.0		$               (45.4)		$                49.6
Other (income) expense, net(2)	1.1		0.3		(1.7)		3.7
Income tax expense (benefit)	4.9		(2.6)		(8.1)		7.9
Depreciation and amortization	9.4		8.5		17.6		14.8
EBITDA	17.6		30.2		(37.6)		76.0
Equity in net (earnings) loss of affiliate	—		(1.7)		(0.8)		(0.6)
(Gain) loss on investment in Persol Holdings(1)	—		(6.3)		67.2		(36.3)
Loss on foreign currency matters(2)	—		—		20.4		—
Gain on sale of assets(3)	(4.4)		—		(5.3)		—
Held for sale impairment charge(4)	18.5		—		18.5		—
Adjusted EBITDA	$                31.7		$                22.2		$                62.4		$                39.1
Adjusted EBITDA margin	2.5 %		1.8 %		2.4 %		1.6 %

 

KELLY SERVICES,
INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)

Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2022 sale of the Persol Holdings investment, the 2022 and 2021 gains and losses on the fair value changes of the investment in Persol Holdings, the 2022 losses on foreign currency matters, the 2022 gains on sale of assets and the impairment of assets held for sale, are useful to understand the Company’s fiscal 2022 financial performance and increases comparability.  Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods.  Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance.

Management uses Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA Margin (percent of total GAAP revenue) which Management believes is useful to compare operating performance compared to prior periods and uses it in conjunction with GAAP measures to assess performance. Our calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies and should be used in conjunction with GAAP measurements.

These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share.  As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company’s financial performance.  Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company’s financial performance.  Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

(1)  In 2022, the loss on the investment in Persol Holdings represents the change in fair value up until the date of the sale of the investment on 
February 15, 2022 as well as the loss on the sale of the investment during the period presented and the related tax benefit.  In 2021, the gain on the investment in Persol Holdings represents the change in fair value of the investment during the period presented and the related tax expense.

(2)  In 2022, the loss on foreign currency matters includes a 
$20.4 million
 loss on currency translation resulting from the substantially complete liquidation of the Company’s 
Japan entity, partially offset by a 
$5.5 million foreign exchange gain on the 
Japan entity’s USD-denominated cash balance.  The foreign exchange gain is included in other (income) expense, net in the EBITDA calculation.

(3)  Gain on sale of assets in 2022 is related to the sale of under-utilized real property in the second quarter of 2022 and other real property sold in the first quarter of 2022.

(4)  Impairment of assets held for sale represents the write-down of the net assets of the Russian operations that are classified as held for sale as of the second quarter of 2022.

 

 

 

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SOURCE 
Kelly Services, Inc.

Kelly to Participate in the Sidoti Virtual Investor Conference

Research, News, and Market Data on Kelly

TROY, Mich., 
Aug. 3, 2022 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading specialty talent solutions provider, today announced it will participate in the 
Sidoti Virtual Investor Conference on 
Wednesday, August 17, 2022.

 Peter Quigley, president and CEO,  Olivier Thirot , executive vice president and chief financial officer, and  James Polehna , chief investor relations officer and corporate secretary, will participate in virtual one-on-one meetings. A copy of Kelly’s investor presentation is also available at kellyservices.com.

About Kelly®

Kelly Services, Inc. (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, 
Light Industrial
, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ more than 350,000 people around the world, and we connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was 
$4.9 billion. Visit 
kellyservices.com and let us help with what’s next for you.

KLYA-FIN

ANALYST & MEDIA CONTACT: 
James Polehna
(248) 244-4586   
james.polehna@kellyservices.com

Wednesday, August 03, 2022

The GEO Group (GEO)
Continuing to Outperform Expectations

The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 103 facilities totaling approximately 83,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

2Q22 Results. Sounding like a broken record, GEO posted above expected operating results for 2Q22. Revenue for the quarter came in at $588.2 million, up from $565.4 million a year ago. Adjusted EBITDA totaled $132.3 million, AFFO was $0.69 per diluted share, EPS was $0.37, and adjusted net income $0.42 per share. In the year ago period, GEO reported $118.4 million, $0.71, $0.29, and $0.41, respectively. We had forecast $560 million, $98.5 million, $0.58, $0.32, and $0.32, respectively. GEO’s results highlight the resiliency of the business model, in our opinion.

Drivers. Many parts of GEO’s business continue to show operating strength, driving the better than expected performance. BI continues to be an exceptional performer, while the Secured Services continues to perform even in the face of various headwinds….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

CoreCivic Reports Second Quarter 2022 Financial Results

Research, News, and Market Data on CoreCivic

Increases Share Buyback
authorization

BRENTWOOD, Tenn., Aug. 02, 2022 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today its financial results for the second quarter of 2022 and provided an update on several significant transactions, including an increase in its share buyback program.

Damon T. Hininger, CoreCivic’s President and Chief Executive Officer, said, “We are pleased to have entered into an agreement during the second quarter to sell our 1,978-bed McRae Correctional Facility for a sale price of $130.0 million. This sale, which is expected to close later in the third quarter, will result in a gain on sale of $75.0 million to $80.0 million. The sale price represents approximately $66,000 per bed which, when used to approximate the value of our over 70,000 company-owned correctional beds, indicates a real estate value in excess of $4 billion, demonstrating the value of our portfolio. Monetizing this asset will generate additional liquidity, which we can use for general corporate purposes, including for our share repurchase program, which our board just increased to $225.0 million, and/or for additional debt reduction.

Hininger continued, “Our second quarter operations were affected by short-term earnings disruptions from transitioning populations at our La Palma Correctional Center in Arizona from an ICE population to an Arizona population, as a result of the previously announced state contract award, and a challenging labor market. Despite the short-term earnings disruption at the La Palma facility that we expect to normalize in the first quarter of 2023, we continue to make great strides in improving the position of our balance sheet, and we were able to begin returning capital to shareholders through our share repurchase authorization. We are pleased with our operational and financial performance and are confident in the long-term outlook for returning to earnings growth.”

Financial Highlights – Second Quarter 2022

• Total revenue of $456.7 million
• CoreCivic
  Safety revenue of $416.4 million
• CoreCivic
  Community revenue of $25.8 million
• CoreCivic
  Properties revenue of $14.5 million
• Net Income of $10.6 million
• Diluted earnings per share of $0.09
• Adjusted diluted EPS of $0.13
• Funds From Operations per diluted share of $0.28
• Normalized Funds From Operations per diluted share of $0.34
• Adjusted EBITDA of $78.8 million

Second Quarter 2022 Financial Results Compared With Second
Quarter 2021

Net income in the second quarter of 2022 totaled $10.6 million, or $0.09 per diluted share, compared with net income in the second quarter of 2021 of $15.6 million, or $0.13 per diluted share. Adjusted for special items, adjusted net income in the second quarter of 2022 was $16.2 million, or $0.13 per diluted share (Adjusted Diluted EPS), compared with adjusted net income in the second quarter of 2021 of $31.1 million, or $0.25 per diluted share. Special items for each period are presented in detail in the calculation of Adjusted Diluted EPS in the Supplemental Financial Information following the financial statements presented herein.   The decline in adjusted per share amounts was primarily the result of transitioning to a new contract with the state of Arizona at our 3,060-bed La Palma Correctional Center in Arizona, the non-renewal of contracts in 2021 with the United States Marshals Service (USMS) at the 1,033-bed Leavenworth Detention Center in Kansas and the 600-bed West Tennessee Detention Facility, and the expiration of a managed-only contract with Marion County, Indiana at the Marion County Jail, which the County replaced with a newly constructed facility. We have two remaining direct contracts with the USMS expiring in 2023 and 2025, and we will work with the USMS to enable it to continue to fulfill its mission. Our renewal rate on owned and controlled facilities remained high at 95% over the previous five years. We believe our renewal rate on existing contracts remains high due to a variety of reasons including the aged and constrained supply of available beds within the U.S. correctional system, our ownership of the majority of the beds we operate, and the cost effectiveness of the services we provide.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $71.1 million in the second quarter of 2022, compared with $82.1 million in the second quarter of 2021. Adjusted EBITDA was $78.8 million in the second quarter of 2022, compared with $101.7 million in the second quarter of 2021. Adjusted EBITDA decreased from the prior year quarter primarily due to the sale of five non-core properties in our Properties segment and two under-utilized facilities in our Community segment, which generated $4.4 million in Adjusted EBITDA in the second quarter of 2021, the aforementioned transition of offender populations at our La Palma Correctional Center, which resulted in a reduction in EBITDA of $10.8 million, and the aforementioned non-renewal of contracts at three facilities that collectively resulted in a reduction in EBITDA of $4.5 million from the second quarter of 2021 to the second quarter of 2022.  

Funds From Operations (FFO) was $34.3 million, or $0.28 per diluted share, in the second quarter of 2022, compared to $11.4 million, or $0.09 per diluted share, in the second quarter of 2021. Normalized FFO, which excludes special items, was $40.7 million, or $0.34 per diluted share, in the second quarter of 2022, compared with $56.0 million, or $0.46 per diluted share, in the second quarter of 2021.   Normalized FFO was negatively impacted by the same factors that affected Adjusted EBITDA.

Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). Please refer to the Supplemental Financial Information and related note following the financial statements herein for further discussion and reconciliations of these measures to net income, the most directly comparable GAAP measure.

New Bank Credit Facility

On May 12, 2022, we entered into a Third Amended and Restated Credit Agreement (New Bank Credit Facility) in an aggregate principal amount of $350.0 million, consisting of a $100.0 million Term Loan A and a revolving credit facility with a borrowing capacity of $250.0 million, which remains undrawn. The New Bank Credit Facility matures in May 2026 and replaced an existing facility (Previous Bank Credit Facility), which was scheduled to expire in April 2023.   The interest rates applicable to the New Bank Credit Facility are tiered based on the then-current total leverage ratio. Based on our current total leverage ratio, loans under the New Bank Credit Facility currently bear interest at a base rate plus a margin of 2.25% or at the Bloomberg Short-Term Bank Yield Index (BSBY) rate plus a margin of 3.25%. In connection with obtaining the New Bank Credit Facility, we paid-down the previous Term Loan A by $67.5 million, and recorded a charge of $0.8 million for the write-off of deferred loan costs associated with the Previous Bank Credit Facility.

Additional Debt Repayments

On May 19, 2022, we announced we voluntarily repaid the remaining $124.1 million outstanding principal balance under our Term Loan B, and satisfied all of our outstanding debt obligations under the agreement. We did not incur any prepayment penalties in connection with the repayment of the Term Loan B, which had a scheduled maturity of December 18, 2024. In connection with the prepayment, we recorded a charge of $6.0 million for the write-off of deferred loan costs, original issue discount and fees and expenses associated with the prepayment of the Term Loan B. The prepayment was made in full with cash on hand.

During the second quarter of 2022, we also purchased an additional $3.6 million of our 4.625% Senior Notes at a weighted average price approximately equal to par in open market purchases, reducing the outstanding balance of the 4.625% Senior Notes to $170.1 million.

Share Repurchases

On August 2, 2022, our Board of Directors authorized an increase in our share repurchase program of up to an additional $75.0 million in shares of our common stock. As a result of the increased authorization, the aggregate authorization under our share repurchase program increased from the original authorization of up to $150.0 million in shares of our common stock to up to $225.0 million shares of our common stock. Since May 16, 2022 through August 1, 2022, we have repurchased 4.2 million shares of our common stock at an aggregate purchase price of $50.6 million, excluding fees, commissions and other costs related to repurchases.

We currently have approximately $174.4 million remaining under the Board authorized share repurchase plan. Additional repurchases of common stock will be made in accordance with applicable securities laws and may be made at management’s discretion within parameters set by the Board of Directors from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate us to purchase any particular amount of our common stock. The authorization for the share repurchase program may be terminated, suspended, increased or decreased by our Board in its discretion at any time.

Business Updates

Asset Sales. On July 25, 2022, we entered into a Purchase & Sale Agreement with the Georgia Building Authority to purchase our 1,978-bed McRae Correctional Facility in McRae, Georgia for a price of $130.0 million. We currently have a management contract with the Federal Bureau of Prisons (BOP) at the McRae Facility, which expires November 30, 2022.  As previously disclosed, we do not expect the contract at the McRae facility to be renewed upon its expiration.  We also entered into an agreement to lease the McRae facility from the Georgia Building Authority through November 30, 2022. We expect the sale, which is subject to customary closing conditions, to be completed during the third quarter of 2022. On July 19, 2022, we completed the sale of our Stockton Female Community Corrections Facility and our Long Beach Community Corrections Center, both located in California, to a third-party that resulted in net sales proceeds of $10.9 million. On July 20, 2022, we also completed the sale of an undeveloped parcel of land in California that resulted in net sales proceeds of $4.8 million.

We currently intend to use the net proceeds from the sales for general corporate purposes, which may include making repurchases under our share repurchase plan and/or reducing our outstanding indebtedness.

CoreCivic Safety and Community Contract Renewals. During the second quarter of 2022, we successfully renewed contracts with multiple government partners:

• A local government agency exercised a two-year renewal option at our 2,672-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi, that allows the USMS to continue utilizing available capacity, extending the contract until June 30, 2024. This contract also has an indefinite number of two-year renewal options.
• The BOP provided notice of its intent to renew our contract for residential reentry and home confinement services at our 60-bed South Raleigh Reentry Center in Raleigh, North Carolina.
• The BOP provided notice of its intent to renew our contract for residential reentry and home confinement services at our 84-bed James River Residential Reentry Center and 36-bed Ghent Residential Reentry Center in the State of Virginia.
• The Colorado Department of Public Safety notified us of its intent to award a contract to provide intensive residential treatment and sex offender supervision and treatment services across five of our residential reentry facilities located in the state.
• The City of Mesa, Arizona renewed our contract to house approximately 120 inmates at our 4,128-bed Central Arizona Florence Correctional Complex in Florence, Arizona.

2022 Financial Guidance

Based on current business conditions, the Company is providing the following update to its financial guidance for the full year 2022:

Our updated 2022 guidance reflects a delay in the reversal of Title 42, a public health order that has been used since March 2020 to deny entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of COVID-19. On April 1, 2022, the Center for Disease Control and Prevention terminated Title 42 with an effective date of May 23, 2022. However, on April 25, 2022, a federal judge issued a temporary restraining order blocking its termination, and on May 20, 2022, ruled that the administration violated administrative law when it announced that it planned to cease Title 42. That ruling is under appeal with a decision unlikely before the first quarter of 2023.   The termination of Title 42 is expected to result in an increase in the number of undocumented people permitted into the United States to claim asylum, and could result in an increase in the number of people apprehended and detained by ICE, our largest government customer. However, it is difficult to predict when Title 42 will be terminated.   Our prior guidance anticipated higher occupancy levels from ICE from the potential termination of Title 42, which is no longer contemplated in our current guidance.

Our updated 2022 guidance also reflects a larger earnings disruption at our La Palma Correctional Center than previously estimated. During the second quarter of 2022, we agreed with the state of Arizona to extend the transition period from the fourth quarter of 2022 to the first quarter of 2023. However, we still expect the final ICE detainees to be transferred out of the La Palma facility during the third quarter of 2022.   Our 2022 guidance also reflects the continuation of a challenging labor market, including above average wage inflation.

During 2022, we expect to invest $79.5 million to $84.0 million in capital expenditures, consisting of $33.5 million to $34.0 million in maintenance capital expenditures on real estate assets, $30.0 million to $32.0 million for capital expenditures on other assets and information technology, and $16.0 million to $18.0 million for facility renovations.  

Supplemental Financial Information and Investor Presentations

We have made available on our website supplemental financial information and other data for the second quarter of 2022.   Interested parties may access this information through our website at http://ir.corecivic.com/ under “Financial Information” of the Investors section.   We do not undertake any obligation and disclaim any duties to update any of the information disclosed in this report.  

Management may meet with investors from time to time during the third quarter of 2022.   Written materials used in the investor presentations will also be available on our website beginning on or about August 12, 2022.   Interested parties may access this information through our website at http://ir.corecivic.com/ under “Events & Presentations” of the Investors section.

Conference Call, Webcast and Replay Information

We will host a webcast conference call at 10:00 a.m. central time (11:00 a.m. eastern time) on Wednesday, August 3, 2022, and will be accessible through the Company’s website at 
www.corecivic.com under the “Events & Presentations” section of the “Investors” page. The live broadcast can also be accessed by dialing 888-221-3881 in the U.S. and Canada, including the confirmation passcode 8733680. An online replay of the call will be archived on our website promptly following the conference call. In addition, there will be a telephonic replay available beginning at 1:15 p.m. central time (2:15 p.m. eastern time) on August 3, 2022, through 1:15 p.m. central time (2:15 p.m. eastern time) on August 11, 2022. To access the telephonic replay, dial 888-203-1112 in the U.S. and Canada. International callers may dial +1 719-457-0820 and enter passcode 8733680.

About CoreCivic

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Forward-Looking Statements

This press release contains statements as to our beliefs and expectations of the outcome of future events that are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) changes in government policy (including the United States Department of Justice, or DOJ, not renewing contracts as a result of President Biden’s Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, or the Private Prison EO) (two agencies of the DOJ, the United States Federal Bureau of Prisons and the United States Marshals Service utilize our services), legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, and the impact of any changes to immigration reform and sentencing laws (our company does not, under longstanding policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an individual’s incarceration or detention); (ii) our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances; (iii) changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds; (iv) general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy; (v) fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations; (vi) the duration of the federal government’s denial of entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of COVID-19, a policy known as Title 42 (On April 1, 2022, the Center for Disease Control and Prevention, or CDC, terminated Title 42, and began preparing for a resumption of regular migration at the United States southern border, effective May 23, 2022; however, on April 25, 2022, a judge issued a temporary restraining order blocking the termination of Title 42 and on May 20, 2022, ruled that the administration violated administrative law when it announced that it planned to cease Title 42.); (vii) government and staff responses to staff or residents testing positive for COVID-19 within public and private correctional, detention and reentry facilities, including the facilities we operate; (viii)  restrictions associated with COVID-19 that disrupt the criminal justice system, along with government policies on prosecutions and newly ordered legal restrictions that affect the number of people placed in correctional, detention, and reentry facilities, including those associated with a resurgence of COVID-19; (ix) whether revoking our REIT election, effective January 1, 2021, and our revised capital allocation strategy can be implemented in a cost effective manner that provides the expected benefits, including facilitating our planned debt reduction initiative and planned return of capital to shareholders; (x) our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom; (xi) our ability to have met and maintained qualification for taxation as a REIT for the years we elected REIT status; and (xii) the availability of debt and equity financing on terms that are favorable to us, or at all. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time with the Securities and Exchange Commission.

CoreCivic takes no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services.

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS		June 30, 2022				December 31, 2021
Cash and cash equivalents		$	115,611			$	299,645
Restricted cash			11,794				11,062
Accounts receivable, net of credit loss reserve of $8,946 and $7,931,         respectively			273,839				282,809
Prepaid expenses and other current assets			42,413				26,872
Assets held for sale			61,587				6,996
Total current assets			505,244				627,384
Real estate and related assets:
Property and equipment, net of accumulated depreciation of $1,671,088 and $1,657,709, respectively			2,197,463				2,283,256
Other real estate assets			213,164				218,915
Goodwill			4,844				4,844
Other assets			355,815				364,539
Total assets		$	3,276,530			$	3,498,938
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses		$	294,435			$	305,592
Current portion of long-term debt			180,378				35,376
Total current liabilities			474,813				340,968
Long-term debt, net			1,148,679				1,492,046
Deferred revenue			25,070				27,551
Non-current deferred tax liabilities			91,828				88,157
Other liabilities			167,200				177,748
Total liabilities			1,907,590				2,126,470
Commitments and contingencies
Preferred stock ? $0.01 par value; 50,000 shares authorized; none issued and outstanding at June 30, 2022, and December 31, 2021, respectively			–				–
Common stock ? $0.01 par value; 300,000 shares authorized; 118,620 and 120,285 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively			1,186				1,203
Additional paid-in capital			1,836,949				1,869,955
Accumulated deficit			(469,195	)			(498,690	)
Total stockholders’ equity			1,368,940				1,372,468
Total liabilities and stockholders’ equity		$	3,276,530			$	3,498,938

CORECIVIC, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the Three Months Ended June 30,
	2022				2021
REVENUE:
Safety	$	416,354			$	419,880
Community		25,775				24,929
Properties		14,526				19,732
Other		42				30
		456,697				464,571
EXPENSES:
Operating
Safety		324,261				307,280
Community		21,282				20,024
Properties		3,377				5,668
Other		80				98
Total operating expenses		349,000				333,070
General and administrative		31,513				33,228
Depreciation and amortization		32,259				34,084
Shareholder litigation expense		1,900				2,550
Asset impairments		–				2,866
		414,672				405,798
OTHER INCOME (EXPENSE):
Interest expense, net		(21,668	)			(23,222	)
Expenses associated with debt repayments and refinancing transactions		(6,805	)			(52,167	)
Gain on sale of real estate assets, net		1,060				38,766
Other income (expense)		(37	)			(8	)
INCOME BEFORE INCOME TAXES		14,575				22,142
Income tax expense		(4,013	)			(6,519	)
NET INCOME	$	10,562			$	15,623
BASIC EARNINGS PER SHARE	$	0.09			$	0.13
DILUTED EARNINGS PER SHARE	$	0.09			$	0.13

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS

	For the Three Months Ended June 30,
	2022				2021
Net income	$	10,562			$	15,623
Special items:
Expenses associated with debt repayments and refinancing transactions		6,805				52,167
Expenses associated with COVID-19		–				836
Gain on sale of real estate assets, net		(1,060	)			(38,766	)
Shareholder litigation expense		1,900				2,550
Asset impairments		–				2,866
Income tax benefit for special items		(2,041	)			(4,185	)
Adjusted net income	$	16,166			$	31,091
Weighted average common shares outstanding – basic		120,529				120,283
Effect of dilutive securities:
Restricted stock-based awards		817				434
Non-controlling interest – operating partnership units		–				1,342
Weighted average shares and assumed conversions – diluted		121,346				122,059
Adjusted Earnings Per Diluted Share	$	0.13			$	0.25

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM
OPERATIONS

	For the Three Months Ended June 30,
	2022				2021
Net income	$	10,562			$	15,623
Depreciation and amortization of real estate assets		24,501				24,926
Gain on sale of real estate assets, net		(1,060	)			(38,766	)
Income tax expense for special items		283				9,641
Funds From Operations	$	34,286			$	11,424
Expenses associated with debt repayments and refinancing transactions		6,805				52,167
Expenses associated with COVID-19		–				836
Income taxes associated with change in corporate tax structure and other special tax items		–				–
Shareholder litigation expense		1,900				2,550
Goodwill and other impairments		–				2,866
Income tax benefit for special items		(2,324	)			(13,826	)
Normalized Funds From Operations	$	40,667			$	56,017
Funds From Operations Per Diluted Share	$	0.28			$	0.09
Normalized Funds From Operations Per Diluted Share	$	0.34			$	0.46

CORECIVIC, INC. AND SUBSIDIARIES

SUPPLEMENTAL
FINANCIAL INFORMATION
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CALCULATION OF EBITDA AND ADJUSTED EBITDA

	For the Three Months Ended June 30,
	2022				2021
Net income	$	10,562			$	15,623
Interest expense		24,292				25,843
Depreciation and amortization		32,259				34,084
Income tax expense		4,013				6,519
EBITDA	$	71,126			$	82,069
Expenses associated with debt repayments and refinancing transactions		6,805				52,167
Expenses associated with COVID-19		–				836
Gain on sale of real estate assets, net		(1,060	)			(38,766	)
Shareholder litigation expense		1,900				2,550
Asset impairments		–				2,866
Adjusted EBITDA	$	78,771			$	101,722

GUIDANCE — CALCULATION OF ADJUSTED NET INCOME, FUNDS FROM
OPERATIONS, EBITDA & ADJUSTED EBITDA

	For the Year Ending December 31, 2022
	Low End of Guidance				High End of Guidance
Net income	$	106,610			$	118,235
Expenses associated with debt repayments and refinancing transactions		6,805				6,805
Gain on sale of real estate assets, net		(84,921	)			(89,921	)
Shareholder litigation expense		1,900				1,900
Income tax expense for special items		21,606				22,981
Adjusted net income	$	52,000			$	60,000
Net income	$	106,610			$	118,235
Depreciation and amortization of real estate assets		97,000				97,500
Gain on sale of real estate assets, net		(84,921	)			(89,921	)
Income tax expense for special items		23,356				24,731
Funds From Operations	$	142,045			$	150,545
Expenses associated with debt repayments and refinancing transactions		6,805				6,805
Shareholder litigation expense		1,900				1,900
Income tax expense for special items		(1,750	)			(1,750	)
Normalized Funds From Operations	$	149,000			$	157,500
Diluted EPS	$	0.89			$	0.99
Adjusted diluted EPS	$	0.44			$	0.50
FFO per diluted share	$	1.19			$	1.26
Normalized FFO per diluted share	$	1.25			$	1.32
Net income	$	106,610			$	118,235
Interest expense		98,000				97,000
Depreciation and amortization		128,000				128,000
Income tax expense		42,606				42,981
EBITDA	$	375,216			$	386,216
Expenses associated with debt repayments and refinancing transactions		6,805				6,805
Gain on sale of real estate assets, net		(84,921	)			(89,921	)
Shareholder litigation expense		1,900				1,900
Adjusted EBITDA	$	299,000			$	305,000

NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION

Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share metrics are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company’s results of operations and are used to review and assess operating performance of the Company and its properties and their management teams. The Company believes that it is useful to provide investors, lenders and security analysts disclosures of its results of operations on the same basis that is used by management.  

FFO, in particular, is a widely accepted non-GAAP supplemental measure of performance of real estate companies, grounded in the standards for FFO established by the National Association of Real Estate Investment Trusts (NAREIT).   NAREIT defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis.   EBITDA, Adjusted EBITDA, and Normalized FFO are useful as supplemental measures of performance of the Company’s properties because such measures do not take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company’s tax provisions and financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time.   Because of the unique structure, design and use of the Company’s properties, management believes that assessing performance of the Company’s properties without the impact of depreciation or amortization is useful. The Company may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary or ordinary component of the ongoing operations of the Company.   Normalized FFO excludes the effects of such items. The Company calculates Adjusted Net Income by adding to GAAP Net Income expenses associated with the Company’s debt repayments and refinancing transactions, and certain impairments and other charges that the Company believes are unusual or non-recurring to provide an alternative measure of comparing operating performance for the periods presented.

Other companies may calculate Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO differently than the Company does, or adjust for other items, and therefore comparability may be limited.   Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO and, where appropriate, their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company’s operating performance or any other measure of performance derived in accordance with GAAP.   This data should be read in conjunction with the Company’s consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.