Core Insights - KellyOCG + Sevenstep has been recognized as the No. 1 provider in HRO Today's 2025 Baker's Dozen Customer Satisfaction Ratings for Total Workforce Solutions, based on customer feedback [1][3] - The recognition emphasizes the company's ability to integrate managed services provider (MSP) and recruitment process outsourcing (RPO) capabilities, offering clients a comprehensive approach to workforce management [2][4] Company Performance - KellyOCG + Sevenstep achieved the highest rankings in both "Quality of Service" and "Breadth of Service" categories within the HRO Today ratings [3] - The company has maintained a strong presence in the Baker's Dozen lists for over a decade, showcasing its consistent delivery of value through its services [4] Technology and Innovation - The company utilizes AI-powered proprietary technologies, such as Helix and Sevayo® Insights, to provide clients with deep talent insights and tailored workforce solutions [2][4] - The integration of data-driven visibility and predictive analytics enhances the company's service offerings, allowing for better workforce management and efficiency [2][5] Industry Context - HRO Today collects feedback from nearly 500 companies to evaluate top performers in the MSP and RPO sectors, providing an objective view based on service breadth, quality, deal size, and customer satisfaction [2] - KellyOCG + Sevenstep's solutions encompass various worker categories, including contingent, professional services, and synthetic labor, positioning the company as a leader in total talent management [2][4]

Core Insights - The analysis of Kelly Services (KELYA) stock indicates challenges in its end market, leading to a "Hold" recommendation due to the stock being perceived as overpriced [1]. Company Analysis - The last evaluation of Kelly Services occurred in October 2023, highlighting concerns regarding its market conditions [1]. - The stock's valuation is considered high, prompting a cautious stance from analysts [1]. Analyst Background - Daniel Sereda, the chief investment analyst at a family office, emphasizes the importance of filtering extensive data to identify critical investment ideas [1]. - The investing group Beyond the Wall Investing, led by Sereda, provides insights similar to those prioritized by institutional market participants [1].

Core Insights - The article discusses the stock performance of Kelly Services (KELYA), which was rated as a "Hold" due to challenges in its end market and perceived high valuation [1]. Company Analysis - Kelly Services has faced challenges in its end market, leading to a cautious outlook on its stock performance [1]. - The stock was considered too pricey at the time of the last analysis in October 2023, prompting a "Hold" recommendation [1]. Analyst Background - Daniel Sereda, the chief investment analyst at a family office, emphasizes the importance of filtering vast amounts of information to identify critical investment ideas [1]. - He operates the investing group Beyond the Wall Investing, which provides insights similar to those used by institutional market participants [1].

Core Insights - Kelly Education has launched the LEARN Standards, a framework aimed at professionalizing the roles of substitute teachers and paraeducators, developed by Ed.D. credentialed educators and HR experts [1][2] - The LEARN Standards are designed to improve workforce retention, educator engagement, and student learning outcomes through clear competency expectations [1][2] Group 1: Addressing Educational Needs - The increase in teacher absenteeism, from 6% pre-pandemic to 10% currently, highlights the critical role of substitute educators in maintaining instructional quality [2] - Research indicates that structured, standards-based training for substitutes correlates with improved classroom performance and retention rates, yet many districts lack adequate training programs [2][5] Group 2: LEARN Standards Framework - The LEARN acronym encompasses five foundational pillars that guide the professional development of substitute teachers and paraeducators [2] - The framework provides role-specific guidance, emphasizing competencies such as leading instruction, ensuring a safe learning environment, and acting professionally [4][6] Group 3: Benefits of LEARN Standards - Improved retention rates are expected as prepared employees demonstrate higher job satisfaction and longer tenure, reducing turnover costs [5] - Enhanced engagement through benchmarked training equips educators with effective classroom management strategies, moving beyond traditional teaching methods [5] - The standards aim to advance student achievement by ensuring well-trained substitutes maintain educational continuity and effectively implement accommodations [5][7]

Core Insights - The Kelly Global Re:work Report highlights a significant disconnect between executives and employees regarding the adoption and benefits of AI in the workplace [4][6] - Executives view acquiring AI skills as essential for career success, while many employees remain skeptical about the technology's advantages [1][2] Group 1: Executive Perspectives - 69% of executives believe that refusing to adopt AI poses a greater threat to job security than the technology itself [2] - More than half (59%) of executives would consider replacing workers who resist adopting AI tools [2] - Executives acknowledge that AI should enable employees to focus on high-value tasks, yet only 47% of workers report time savings from AI [3] Group 2: Employee Perspectives - Less than half of employees (47%) feel they are benefiting from AI tools, and 32% do not see any advantages [3] - There is a notable gap in trust and understanding of AI's role in enhancing job performance among employees [4][5] Group 3: Implementation Challenges - 80% of executives admit that AI implementation is stalling due to a lack of expertise among teams [3] - Organizations face technical challenges, security concerns, and slow user adoption, which hinder effective AI integration [4] - The report identifies a skills gap as a critical barrier to realizing the full potential of AI in the workplace [4][5] Group 4: Recommendations for Organizations - The report urges employers to address three interconnected gaps: technology, talent, and trust [5] - Recommendations include linking AI fluency to career development, providing hands-on demonstrations to alleviate fears, and establishing feedback loops to align leadership and employee experiences [5][6] - Leaders are encouraged to model AI usage in their roles and foster a culture that promotes AI-driven problem-solving [6]

Core Viewpoint - The article emphasizes the importance of enabling Javascript and cookies in browsers to prevent access issues, particularly when ad-blockers are enabled [1] Group 1 - The article suggests that users may face restrictions if they have ad-blockers enabled, indicating a need for adjustments in browser settings [1]

Revenue Performance - Revenue from services in Q3 2025 decreased by 9.9% year-over-year to $935.0 million, with declines in ETM and SET segments, partially offset by growth in the Education segment [149]. - Year-to-date revenue from services increased by 1.9% to $3,201.7 million, primarily driven by the acquisition of MRP [155]. - In the ETM segment, revenue decreased by 13.1% in Q3 2025, primarily due to a 16.4% drop in staffing services [164]. - The SET segment experienced a 9.0% decline in revenue, largely due to reduced demand from U.S. federal government contractors [165]. - Education segment revenue increased by 0.9% in Q3 2025, driven by improved fill rates [166]. Profitability and Expenses - Gross profit decreased by 12.5% to $194.0 million, with a gross profit rate of 20.8%, down 60 basis points from the previous year [151]. - Gross profit for the Enterprise Talent Management (ETM) segment decreased by 15.4% to $96.7 million in Q3 2025, compared to $114.4 million in Q3 2024 [172]. - The Science, Engineering & Technology (SET) segment's gross profit decreased by 11.8% to $77.2 million in Q3 2025, influenced by changes in business mix and higher employee-related costs [174]. - The Education segment's gross profit increased by 2.0% to $20.1 million in Q3 2025, driven by higher revenue volume and lower employee-related costs [175]. - Consolidated total gross profit decreased by 12.5% to $194.0 million in Q3 2025, while year-to-date gross profit increased by 2.3% to $656.0 million [180]. - Total SG&A expenses decreased by 11.2% to $194.4 million, reflecting effective expense management and integration efforts [152]. - SG&A expenses for ETM decreased by 9.2% to $87.6 million in Q3 2025, primarily due to lower employee-related costs [180]. - The SET segment's SG&A expenses decreased by 15.3% to $57.6 million in Q3 2025, attributed to expense management actions [181]. - The Education segment's SG&A expenses increased by 6.3% to $24.5 million in Q3 2025, reflecting costs to support revenue growth [182]. - The company reported a goodwill impairment charge of $102.0 million in Q3 2025, significantly impacting earnings from operations [149]. - ETM reported a profit of $9.1 million in Q3 2025, a decrease of 48.9% compared to $18.0 million in Q3 2024 [186]. Tax and Cash Flow - Income tax expense for Q3 2025 was $46.4 million, compared to a tax benefit of $2.6 million in Q3 2024, primarily due to valuation allowances and impairment charges [154]. - The company's cash, cash equivalents, and restricted cash totaled $35.4 million at the end of Q3 2025, down from $45.6 million at year-end 2024 [196]. - The company believes its cash flow from operations and available liquidity will be sufficient to meet anticipated cash requirements while maintaining adequate liquidity for normal operations [208]. Debt and Liquidity - The debt-to-total capital ratio improved to 9.1% at the end of Q3 2025, compared to 16.2% at year-end 2024, indicating a stronger capital structure [201]. - As of the end of Q3 2025, the company had $150.0 million available on its revolving credit facility and $89.0 million available on its securitization facility [207]. - The securitization facility had $118.4 million in long-term borrowings and $42.6 million in standby letters of credit related to workers' compensation [207]. - The company has additional unsecured, uncommitted short-term local credit facilities totaling $3.1 million, with no borrowings under these facilities as of Q3 2025 [209]. Risk Management - The company entered into a $50.0 million 12-month interest rate swap and a $50.0 million 18-month interest rate swap, locking in fixed rates of 4.772% and 4.468% respectively [218]. - The company has not identified specific plans to repatriate a majority of its international cash balances as of Q3 2025 [206]. - The company continues to provide MSP, RPO, and Functional Service Provider solutions in the EMEA region following the sale of its EMEA staffing operations in Q1 2024 [206]. - The company monitors the credit ratings of its banking partners regularly, assessing the risk of banks not honoring commitments as insignificant [210]. - There have been no significant changes to the company's exposure management and procedures regarding market risk, foreign currency risk, and interest rate risk during Q3 2025 [216]. - The company is exposed to foreign currency risk primarily related to its foreign subsidiaries, with local cash flows generally unaffected by changes in foreign currency rates [217].

Core Insights - Kelly Services reported quarterly earnings of $0.18 per share, missing the Zacks Consensus Estimate of $0.42 per share, and down from $0.21 per share a year ago, representing an earnings surprise of -57.14% [1] - The company posted revenues of $935 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 3.89%, and down from $1.04 billion year-over-year [2] - The stock has underperformed, losing about 18.2% since the beginning of the year compared to the S&P 500's gain of 15.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.78 on revenues of $1.16 billion, and for the current fiscal year, it is $2.15 on revenues of $4.4 billion [7] - The estimate revisions trend for Kelly Services was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Staffing Firms industry, to which Kelly Services belongs, is currently in the bottom 19% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Korn/Ferry, is expected to report quarterly earnings of $1.30 per share, reflecting a year-over-year change of +7.4%, with revenues expected to be $702.98 million, up 4.2% from the previous year [9]

Financial Performance - Q3 2025 revenue was $935.0 million, a 9.9% decrease year-over-year, primarily due to lower demand in ETM and SET segments, with an underlying revenue decline of approximately 2% after excluding discrete impacts [4][6]. - Operating loss for Q3 2025 was $102.1 million, compared to earnings of $2.6 million in Q3 2024, reflecting non-cash goodwill impairment charges of $102.0 million [5][6]. - Adjusted EBITDA for Q3 2025 was $16.5 million, a decrease of 36.7% year-over-year, with an adjusted EBITDA margin of 1.8%, down 70 basis points [5][6]. - For the 39-week period ended September 28, 2025, revenue was $3.2 billion, a 1.9% increase compared to the same period in 2024, primarily due to the May 2024 acquisition of MRP [7][8]. - The company expects a total year-over-year revenue decline of 12% to 14% for fiscal 2025, with an underlying revenue decline of 4% to 6% [12]. - Adjusted earnings per share for Q3 2025 were $0.18, down from $0.21 in Q3 2024 [7]. - Total revenue from services for the third quarter of 2025 was $935.0 million, a decrease from $1,038.1 million in the third quarter of 2024, representing a decline of approximately 10% [33]. - The Enterprise Talent Management segment generated $487.9 million in revenue for Q3 2025, down from $561.6 million in Q3 2024, reflecting a decrease of about 13% [33]. - The Science, Engineering & Technology segment reported $304.9 million in revenue for Q3 2025, down from $335.0 million in Q3 2024, a decrease of about 9% [33]. - The company reported a goodwill impairment charge of $102.0 million in Q3 2025, significantly impacting net earnings [31]. - Net loss for 2025 was $125.3 million, compared to a net earnings of $31.2 million in 2024, representing a decline of $156.5 million [19]. - Basic earnings per share for 2025 was $(3.56), a decrease of $(4.42) from $0.86 in 2024 [19]. Cash Flow and Assets - Year-to-date free cash flow improved to $87.2 million in 2025 from $15.8 million in 2024 [28]. - Cash flows from operating activities for the 39 weeks ended September 28, 2025, were $94.0 million, compared to $11.9 million in the same period of 2024 [31]. - The company had a net cash used in financing activities of $131.4 million in 2025, contrasting with a net cash inflow of $217.3 million in 2024 [31]. - Cash, cash equivalents, and restricted cash at the end of the period were $35.4 million, down from $40.4 million at the end of the same period in 2024 [31]. - Total current assets decreased to $1,279.8 million in September 2025 from $1,365.5 million in December 2024 [28]. - Total assets decreased to $2,393.1 million in September 2025 from $2,632.3 million in December 2024 [28]. - Working capital decreased to $473.3 million in September 2025 from $539.0 million in December 2024 [28]. Dividends and Share Repurchases - The company declared a quarterly cash dividend of $0.075 per share, payable on December 3, 2025 [9]. - The company anticipates being active with Class A share repurchases in Q4 2025, indicating confidence in its strategy [6]. Operational Efficiency and Cost Management - Adjusted SG&A expenses declined by 9.7% in Q3 2025, reflecting expense optimization initiatives [6]. - The company’s adjusted earnings from operations for Q3 2025 were $4.3 million, compared to $11.7 million in Q3 2024, reflecting a decline of approximately 63% [40]. - Total Adjusted EBITDA for Q3 2025 was $16.5 million, a decline from $26.2 million in Q3 2024, representing a decrease of about 37.0% [44]. - The Adjusted EBITDA margin for Q3 2025 was 1.8%, down from 2.5% in Q3 2024 [44]. - Integration and realignment costs for Q3 2025 totaled $3.5 million, reflecting ongoing efforts to consolidate operations and align processes [53]. - The company plans to continue focusing on market expansion and integration of recent acquisitions to improve operational efficiency and financial performance [49]. Tax and Impairment Charges - The effective income tax rate for Q3 2025 was -44.8%, compared to 140.8% in Q3 2024, reflecting significant changes in tax expense due to goodwill impairment [17]. - The valuation allowance on deferred tax assets in Q3 2025 was $69.7 million, established due to cumulative losses in recent years [52]. - The company incurred a goodwill impairment charge of $83.6 million in Q3 2025, attributed to reduced demand and integration challenges from recent acquisitions [52]. Segment Performance - Revenue from services in the Science, Engineering & Technology segment increased by 13.5% to $944.6 million in 2025 from $832.3 million in 2024 [26]. - The Education segment reported a revenue increase of 5.0%, reaching $717.6 million in 2025 compared to $683.1 million in 2024 [26].

Core Insights - Kelly Services reported a revenue of $935.0 million for Q3 2025, reflecting a 9.9% decrease compared to Q3 2024, primarily due to lower demand in the ETM and SET segments, partially offset by a 0.9% growth in the Education segment [3][8][9] - The company experienced an operating loss of $102.1 million in Q3 2025, a significant decline from earnings of $2.6 million in Q3 2024, largely attributed to non-cash goodwill impairment charges [4][6] - Adjusted EBITDA for Q3 2025 was $16.5 million, down 36.7% year-over-year, with an adjusted EBITDA margin of 1.8%, a decrease of 70 basis points [4][8] Financial Performance - Revenue for the 39-week period ended September 28, 2025, was $3.2 billion, a 1.9% increase compared to the same period in 2024, primarily due to the acquisition of MRP [9][10] - The operating loss for the first nine months of 2025 was $69.1 million, compared to earnings of $41.6 million in the same period of 2024 [10][12] - The company reported a net loss of $150.1 million for Q3 2025, compared to a net income of $0.8 million in Q3 2024 [20][22] Segment Analysis - In Q3 2025, the Enterprise Talent Management segment generated $487.9 million in revenue, down 13.1% from Q3 2024, while the Science, Engineering & Technology segment saw a 9.0% decline to $304.9 million [27][28] - The Education segment reported a slight revenue increase of 0.9% to $143.3 million, indicating resilience amidst overall declines in other segments [27][28] - Adjusted SG&A expenses decreased by 9.7% in Q3 2025, reflecting ongoing expense optimization initiatives [8] Tax and Earnings Per Share - Income tax expense for Q3 2025 was $46.4 million, compared to a tax benefit of $2.6 million in Q3 2024, influenced by non-cash goodwill impairment charges [5][11] - Loss per share for Q3 2025 was $4.26, including non-cash goodwill impairment charges of $2.37 per share, compared to earnings per share of $0.02 in Q3 2024 [6][12] Future Outlook - The company anticipates no significant changes in macroeconomic conditions for Q4 2025 and expects a positive resolution to the federal government shutdown [14] - Kelly Services declared a quarterly cash dividend of $0.075 per share, payable on December 3, 2025, reflecting confidence in its strategy [14]