KELYA - Kelly Services (KELYA) - Re-allocation of Capital Has Begun; Acquiring RocketPower
Redeploying APAC Capital. In its first move since the February announcement of the sale of the majority of its APAC assets, Kelly Services is acquiring fast-growing RocketPower, a leading provider of Recruitment Process Outsourcing (RPO) and other outsourced talent solutions. Management described the business as "high-margin, high-growth assets," although terms of the deal were not disclosed.Who Is RocketPower? Founded in 2016 by Silicon Valley veteran Mat Caldwell, RocketPower is a leading provider of RPO and other outsourced talent solutions. RocketPower's customers include rapidly scaling U.S. tech companies known for disrupting industries and changing the world. In 2021, RocketPower generated $28 million of revenue and anticipates triple digit growth in 2022.Why RPO? RPO is when a company transfers all or part of its permanent recruitment to an external provider. From a broader perspective, Kelly's OCG unit, which includes its own RPO unit, saw revenue grow 18.9% in 2021 with OCG revenue exceeding pre-COVID levels for the past 5 quarters. Kelly's saw notable growth in RPO in 2021 as demand for this product reflects customers' adjustment to the impact of a challenging talent market.RPO Market. The RPO market is one of the fastest-growing outsourcing markets in the world experiencing double-digit growth in the past few years. Projections for the 2022 global RPO market are expected to exceed $5 billion surpassing pre-pandemic levels. The RocketPower acquisition will significantly expand Kelly's RPO solution and delivery offering and provides Kelly with another entry point into the high-tech industry. Maintaining Outperform and $30 PT. We are maintaining our Outperform rating and our 12-month price target of $30. While the recovery is occurring at a slower pace than anticipated, Kelly's specialization focus, spiced up with the capital from the Persol sales, will help drive faster top line growth and higher margins over time. At our price target, KELYA shares would trade at 18x our 2022 adjusted EPS estimate, 6.8x EV/estimated 2022 EBITDA, and 0.15x EV/estimated 2022 revenues. Read More >>