Core Insights - Kelly Services, Inc. reported an earnings per share (EPS) of $0.16, which was below the estimated EPS of $0.43, indicating weaker profitability than expected [2][5] - The company's revenue for the period was approximately $1.05 billion, slightly missing the forecast of $1.06 billion, suggesting challenges in meeting sales targets [3][5] Financial Metrics - The price-to-sales (P/S) ratio is 0.13, indicating that investors are paying 13 cents for every dollar of the company's sales, reflecting cautious market sentiment [3] - The debt-to-equity ratio stands at 0.16, suggesting a relatively low level of debt compared to equity [3] - The current ratio is 1.59, indicating a good level of liquidity to cover short-term liabilities [4] - The enterprise value to operating cash flow (EV/OCF) ratio is 6.25, showing that the company's operating cash flow can cover its enterprise value multiple times, providing financial stability [4]

Revenue and Profitability - Revenue from services in 2025 was $4,250.9 million, a decrease of 1.9% compared to $4,331.8 million in 2024[156]. - Gross profit decreased by 3.4% to $853.0 million, with a gross profit rate of 20.1%, down 30 basis points from 2024[156][162]. - Loss from operations in 2025 totaled $69.8 million, significantly higher than a loss of $15.1 million in 2024, primarily due to increased impairment charges and lower revenue[156][165]. - Consolidated total gross profit decreased to $853.0 million in 2025, down 3.4% from $882.6 million in 2024, and down 8.2% from $961.4 million in 2023[178]. - Enterprise Talent Management gross profit decreased to $392.8 million in 2025, a decline of 11.7% from $444.9 million in 2024, and 4.5% from $465.7 million in 2023[178]. - Science, Engineering & Technology gross profit increased to $313.2 million in 2025, up 5.1% from $297.9 million in 2024, and up 20.7% from $246.9 million in 2023[178]. - Education segment gross profit increased to $147.0 million in 2025, a rise of 5.2% from $139.8 million in 2024, and 8.6% from $128.7 million in 2023[178]. Expenses and Cost Management - Total SG&A expenses increased by 0.9% to $825.9 million, primarily due to the acquisition of MRP, while excluding the acquisition, SG&A expenses decreased by 4.8%[156][163]. - SG&A expenses (excluding depreciation and amortization) totaled $774.9 million in 2025, a slight increase of 1.0% from $766.9 million in 2024, but down 14.3% from $894.6 million in 2023[186]. - Enterprise Talent Management SG&A expenses decreased to $373.0 million in 2025, down 3.3% from $385.9 million in 2024, and down 10.7% from $432.2 million in 2023[186]. - Science, Engineering & Technology SG&A expenses increased to $247.1 million in 2025, up 9.0% from $226.7 million in 2024, and up 22.7% from $184.8 million in 2023[186]. - Corporate expenses decreased to $53.8 million in 2025, down 7.9% from $58.4 million in 2024, and down 7.6% from $63.2 million in 2023[186]. Cash Flow and Financial Position - Cash, cash equivalents, and restricted cash totaled $37.7 million at year-end 2025, down from $45.6 million at year-end 2024[205]. - Net cash generated from operating activities increased to $122.6 million in 2025, compared to $26.9 million in 2024 and $76.7 million in 2023[206]. - The debt-to-total capital ratio improved from 16.2% at year-end 2024 to 9.4% at year-end 2025, indicating a stronger capital structure[216]. - As of year-end 2025, the company had $150.0 million available on its revolving credit facility and $105.5 million on its securitization facility[221]. - The company expects to meet cash requirements through operations, available cash, and credit facilities, with potential additional funding from bank facilities or asset sales[218]. Goodwill and Impairment - The goodwill impairment charge in 2025 was $102.0 million, compared to $72.8 million in 2024, driven by reduced demand and integration costs[156][164]. - As of year-end 2025, total goodwill amounted to $202.1 million, while at year-end 2024, it was $304.2 million[245]. - The company recorded an impairment charge of $72.8 million for Softworld's goodwill in 2024, with a remaining goodwill balance of $38.5 million as of year-end 2024[244]. - The estimated fair value of each reporting unit tested in 2025 exceeded its carrying value by more than 10%, indicating no impairment of goodwill[242]. - The company assessed that an increase in the discount rate of 100 basis points or a decrease of 100 basis points in revenue growth rate assumptions would not result in goodwill impairment[243]. Strategic Initiatives and Leadership - The company is focused on cost optimization initiatives and enhancing operational capabilities to improve profitability as market conditions stabilize[150][151]. - The hiring of Chris Layden as CEO in September 2025 is aimed at strengthening competitive positioning and transforming technology processes[149]. Segment Performance - Revenue from the Enterprise Talent Management segment decreased by 8.7% to $2,005.5 million, while revenue from the Science, Engineering & Technology segment increased by 6.4% to $1,240.4 million[170]. - The Education segment's revenue increased by 3.9% to $1,010.7 million, driven by higher fill rates and bill rates[170][173]. - Excluding the impact of acquisitions, revenue from staffing services decreased by 11.7% and revenue from outcome-based services decreased by 12.1%[171][172]. Legal and Compliance - The company routinely assesses legal proceedings and claims, with potential exposure impacting the required accruals for litigation costs[247]. - The gross accrual for litigation costs was $2.8 million at year-end 2025, up from $1.5 million at year-end 2024[247].

Revenue Performance - Fourth-quarter revenue was $1.1 billion, a decrease of 11.9% compared to Q4 2024, primarily due to lower demand in ETM and SET segments [4]. - Full-year revenue for 2025 was $4.3 billion, down 1.9% year-over-year, with a 6.2% decline on an organic basis when excluding the impact of acquisitions [7]. - Revenue from services decreased to $4,250.9 million, down 1.9% from $4,331.8 million in 2024 [19]. - Revenue from the Enterprise Talent Management segment dropped by 18.6% to $463.4 million [26]. - The Science, Engineering & Technology segment reported a revenue decline of 11.3% to $295.8 million [26]. - Revenue from services for Enterprise Talent Management decreased by 8.7% to $2,005.5 million in 2025 from $2,196.1 million in 2024 [29]. - Science, Engineering & Technology segment revenue increased by 6.4% to $1,240.4 million in 2025 compared to $1,165.7 million in 2024 [29]. - Education segment revenue rose by 3.9% to $1,010.7 million in 2025 from $972.3 million in 2024 [29]. - Total revenue from services for the year-to-date 2025 was $4,250.9 million, a slight increase from $4,331.8 million in 2024 [31]. Profitability and Loss - Adjusted EBITDA for Q4 2025 was $21.0 million, down 51.7% year-over-year, resulting in an adjusted EBITDA margin of 2.0% [5]. - The company reported an operating loss of $0.7 million in Q4 2025, a significant improvement from a loss of $56.7 million in Q4 2024 [5]. - Net loss for the year was $254.1 million, significantly higher than the loss of $0.6 million in 2024 [19]. - Adjusted EBITDA fell to $109.4 million, representing a 23.8% decrease from $143.5 million in 2024 [19]. - Net earnings for Q4 2025 were a loss of $128.8 million, compared to a loss of $31.8 million in Q4 2024, indicating a significant decline in profitability [37]. - Business unit profit for the Education segment in 2025 was $46.0 million, down from $59.0 million in 2024, indicating challenges in maintaining profitability [37]. Cash Flow and Financial Health - Full-year free cash flow increased to $114 million, a sixfold increase compared to the prior year [6]. - Year-to-date free cash flow improved to $114.1 million, up from $15.8 million in 2024 [21]. - Free Cash Flow for the year 2025 was $114.1 million, a substantial increase from $15.8 million in 2024, reflecting improved cash generation from operating activities [37]. - The company reported a net cash from operating activities of $122.6 million in 2025, significantly higher than $26.9 million in 2024, showcasing operational efficiency improvements [37]. Expenses and Charges - Income tax expense for Q4 2025 was $126.2 million, compared to a tax benefit of $23.8 million in Q4 2024, reflecting a valuation allowance increase due to cumulative losses [5]. - Adjusted SG&A expenses for the year-to-date 2025 were $793.7 million, compared to $790.5 million in 2024, reflecting a marginal increase of 0.3% [33]. - Goodwill impairment charge for the year-to-date 2025 was $102.0 million, compared to $72.8 million in 2024, representing a 40.1% increase [29]. - Integration, realignment, and restructuring charges for the year-to-date 2025 totaled $28.7 million, up from $16.1 million in 2024 [33]. - Integration, realignment, and restructuring charges totaled $8.4 million in Q4 2025, compared to $3.6 million in Q4 2024, highlighting ongoing transformation efforts [44]. - The company incurred a goodwill impairment charge of $102.0 million in 2025, primarily due to reduced demand and integration challenges from acquisitions [42]. Future Outlook - The company expects Q1 2026 revenue to decline between 11% to 13% year-over-year, with an adjusted EBITDA margin of approximately 1.5% [12]. - The company anticipates a return to organic revenue growth and adjusted EBITDA margin expansion in the second half of 2026 [6].

Core Viewpoint - Kelly Services, Inc. has entered into a Letter Agreement with Hunt Equity Opportunities, LLC to amend its stockholder rights plan and facilitate governance changes following Hunt's acquisition of a controlling stake in the company [1][2][3]. Group 1: Stockholder Rights Plan and Governance Changes - The Rights Plan was initially adopted to allow the Board sufficient time to evaluate a Share Purchase Agreement with Hunt [2]. - The Board unanimously approved Amendment No. 1 to the Rights Plan, which exempts Hunt's purchase of shares from triggering events under the Rights Plan and allows the Rights Plan to expire before the transfer [2]. - Hunt acquired 3,039,940 shares of Class B Common Stock from Trust K, resulting in Hunt holding 92.2% of the Class B Common Stock and becoming the controlling stockholder of Kelly [3]. Group 2: Board Composition and Management Support - The Board will now consist of four designees from Hunt and three existing directors, with Chris Hunt serving as the chairman [4]. - The changes in the Board composition are aimed at supporting Kelly's management in accelerating growth and realizing the company's potential [4][5]. - Outgoing Board members have resigned, and the company expresses gratitude for their contributions while welcoming new members [5]. Group 3: Company Overview - Kelly Services, Inc. specializes in talent solutions, connecting over 400,000 people with work annually and generating revenue of $4.3 billion in 2024 [9]. - The company operates in various industries, including science, engineering, technology, education, manufacturing, retail, finance, and energy [9]. Group 4: Hunt Companies Overview - Hunt Companies is a privately held investment platform with over 75 years of experience in real estate, infrastructure, and financial services [10]. - The company focuses on sustainable growth and innovation, aiming to create enduring value for clients and communities [10].

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, driven mainly by the acquisition of MRP [155]. - The ETM segment experienced a revenue decline of 13.1% in Q3 2025, primarily due to a 16.4% decrease in staffing services [164]. - The SET segment's revenue decreased by 9.0% in Q3 2025, driven by lower demand from U.S. federal government contractors [165]. - Education segment revenue increased by 0.9% in Q3 2025, attributed to improved fill rates [166]. Profitability - Gross profit for Q3 2025 was $194.0 million, a decrease of 12.5%, resulting in 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, compared to $221.7 million in Q3 2024 [180]. - ETM reported a profit of $9.1 million in Q3 2025, a decrease of 48.9% from $18.0 million in Q3 2024 [186]. Expenses Management - Total SG&A expenses in Q3 2025 decreased by 11.2% to $194.4 million, reflecting effective expense management and integration efforts [152]. - In the first nine months of 2025, SG&A expenses increased by 4.4% to $627.4 million, largely due to the MRP acquisition [157]. - SG&A expenses for ETM decreased by 9.2% to $87.6 million in Q3 2025, attributed to lower employee-related costs [180]. - The SET segment's SG&A expenses decreased by 15.3% to $57.6 million in Q3 2025, also due to lower employee-related costs [181]. - The corporate expenses decreased by 28.3% to $12.1 million in Q3 2025, driven by lower employee-related costs and transaction costs [182]. Financial Position - 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 debt-to-total capital ratio was 9.1% at the end of Q3 2025, a decrease from 16.2% at year-end 2024, indicating improved 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 as of Q3 2025 [209]. - The company believes its cash flow from operations and available liquidity will be sufficient to meet anticipated cash requirements while maintaining normal operating liquidity [208]. 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 [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 natural hedges against currency risks in normal operations [217].

Financial Performance - Q3 2025 revenue was $935.0 million, a 9.9% decrease year-over-year, primarily due to lower demand in the ETM and SET segments [4]. - 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]. - 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 [6]. - For the first nine months of 2025, revenue was $3.2 billion, a 1.9% increase compared to the same period in 2024, primarily due to the acquisition of MRP [7]. - 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]. - Adjusted EBITDA margin for the first nine months of 2025 was 2.8%, a decrease of 40 basis points compared to the prior year [8]. - The company recorded a goodwill impairment charge of $102.0 million in 2025, with no such charge in 2024 [26]. - For the 39 weeks ended September 28, 2025, net earnings were a loss of $125.3 million compared to a profit of $31.2 million in the same period of 2024 [31]. - In Q3 2025, net earnings were $(150.1) million, compared to $0.8 million in Q3 2024, reflecting a significant decline [42]. - Adjusted net earnings for Q3 2025 were $6.5 million, down from $7.7 million in Q3 2024, indicating a decrease of 15.6% year-over-year [42]. - Adjusted EBITDA for Q3 2025 was $16.5 million, a decrease from $26.2 million in Q3 2024, representing a decline of 37.0% [44]. - The adjusted EBITDA margin for Q3 2025 was 1.8%, down from 2.5% in Q3 2024, showing a contraction in profitability [44]. Cash Flow and Dividends - Year-to-date free cash flow for 2025 was $87.2 million, significantly up from $15.8 million in 2024 [28]. - A quarterly cash dividend of $0.075 per share was declared, payable on December 3, 2025 [9]. - The company generated net cash from operating activities of $94.0 million in 2025, a significant increase from $11.9 million in 2024 [31]. - Free cash flow for the year-to-date 2025 was $87.2 million, significantly higher than $2.8 million in the same period of 2024 [47]. Revenue Segments - Revenue from services for 2025 was $3,201.7 million, an increase of 1.9% from $3,140.7 million in 2024 [19]. - Gross profit for 2025 reached $656.0 million, up 2.3% from $641.1 million in 2024 [19]. - Revenue from the Science, Engineering & Technology segment increased by 13.5% to $944.6 million in 2025, compared to $832.3 million in 2024 [26]. - The Education segment reported a revenue increase of 5.0% to $717.6 million in 2025, up from $683.1 million in 2024 [26]. - Total segment revenue for Enterprise Talent Management in 2025 was $1,542.1 million, down from $1,626.9 million in 2024, reflecting a decrease of approximately 5.2% [37]. - 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]. - Year-to-date revenue from services for 2025 was $3,201.7 million, compared to $3,140.7 million in 2024, indicating a growth of about 1.9% [37]. Assets and Liabilities - Total current assets decreased to $1,279.8 million in September 2025 from $1,365.5 million in December 2024 [28]. - Total liabilities decreased to $1,882.0 million in September 2025 from $2,107.7 million in December 2024 [28]. - The company had cash, cash equivalents, and restricted cash of $35.4 million at the end of the period, down from $40.4 million at the end of the previous year [31]. Impairment and Charges - The company incurred a goodwill impairment charge of $102.0 million in Q3 2025, primarily due to reduced demand and integration costs from acquisitions [52]. - Integration and realignment costs in Q3 2025 totaled $3.5 million, reflecting ongoing efforts to consolidate operations and align processes [53]. - The company reported a valuation allowance on deferred tax assets of $69.7 million in Q3 2025, due to cumulative losses in recent years [52]. - Restructuring charges in 2024 include $3.3 million for severance and $3.1 million for transformation execution costs [56]. - A $0.2 million adjustment to restructuring charges was made in Q3 2024 [56]. - The asset impairment charge in Q2 2024 was related to right-of-use assets for the leased headquarters facility [57]. - The sale of Ayers Group occurred in Q2 2024, impacting the gain/loss on sale of assets [57]. Strategic Plans - The company plans to be active with Class A share repurchases in Q4 2025, reflecting confidence in its strategy [6]. - The company is addressing near-term opportunities to enhance execution and agility while positioning for future growth [3]. - The company plans to continue focusing on integrating recent acquisitions and optimizing operational efficiency to improve future performance [49]. - Business unit adjusted EBITDA for the Science, Engineering & Technology segment was $9.1 million in Q3 2025, compared to a loss of $(82.4) million in the same period of 2024 [45].

Revenue and Profitability - Revenue from services in Q2 2025 increased by 4.2% to $1,101.8 million, primarily driven by the acquisition of MRP[140] - Gross profit for Q2 2025 rose by 5.5% to $225.5 million, but decreased by 5.1% when excluding the impact of the acquisition[141] - Net earnings for Q2 2025 were $19.0 million, reflecting a significant increase of 314.7% compared to $4.6 million in Q2 2024[139] - Revenue from the Education segment grew by 5.6% in Q2 2025, reaching $265.3 million, supported by improved fill rates[152] - Revenue from talent solutions increased by 2.3% in Q2 2025, while permanent placement revenue decreased by 8.7%[140] - Revenue from services for the first six months of 2025 increased by 7.8% to $2,266.7 million, driven by the MRP acquisition[145] - Consolidated total gross profit increased by 5.5% to $225.5 million in Q2 2025, with a year-to-date increase of 10.2% to $462.0 million[161] Expenses and Margins - Total SG&A expenses increased by 8.2% to $207.3 million in Q2 2025, with a decrease of 2.2% when excluding the acquisition impact[142] - SG&A expenses increased by 8.8% to $194.8 million in Q2 2025, with a year-to-date increase of 13.4% to $407.7 million[169] - The gross profit rate for the first six months of 2025 increased by 50 basis points to 20.4%, primarily due to the MRP acquisition[146] - The gross profit rate for consolidated total increased by 0.3 percentage points to 20.5% in Q2 2025 compared to the prior year[161] Cash Flow and Liquidity - Cash, cash equivalents, and restricted cash totaled $24.5 million at the end of Q2 2025, down from $45.6 million at year-end 2024[187] - Net cash generated from operating activities was $119.3 million in the first six months of 2025, compared to $32.2 million in the same period of 2024[188] - The company believes its cash flow from operations and available liquidity will be sufficient to meet anticipated cash requirements[201] - The company continues to monitor liquidity and capital resources globally, utilizing cash pooling and intercompany loans to meet funding needs[197] Debt and Financing - The current ratio decreased to 1.5 at the end of Q2 2025 from 1.7 at year-end 2024[189] - The debt-to-total capital ratio improved to 5.5% at the end of Q2 2025 from 16.2% at year-end 2024[192] - The company entered into interest rate swaps locking in variable SOFR rates at fixed rates of 4.772% and 4.468% for portions of long-term borrowings[209] - As of the end of the second quarter of 2025, the company had $130.0 million available on its $150.0 million revolving credit facility and $153.1 million on its $250.0 million securitization facility[200] Acquisitions and Operations - The acquisition of MRP was finalized for a purchase price of $425.0 million, with an adjusted cash payment of $440.0 million due to estimated cash and working capital adjustments[199] - The integration of MRP's portfolio is progressing, with realignment of sales and recruiting teams completed in Q2 2025[132] - SET revenue from services increased due to the acquisition of MRP staffing and outcome-based solutions, while excluding the acquisition, revenue decreased by 7.8%[157] - Education revenue growth was driven by higher fill rates and bill rates, partially offset by weather-related school closures[158] Profitability by Segment - ETM reported a profit decrease of 28.5% to $11.1 million in Q2 2025, while SET profit increased by 2.1% to $19.3 million[176] Other Financial Information - The company has no material unrecorded commitments or guarantees associated with related parties or unconsolidated entities[194] - The company has additional unsecured, uncommitted short-term local credit facilities totaling $3.2 million, with no borrowings as of the second quarter-end 2025[202] - The company expects working capital requirements to increase with rising demand for its services[196] - The company has not identified plans to repatriate a majority of its international cash balances following the sale of its EMEA operations[197]

Q2 2025 Earnings Overview [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Q2 2025 revenue grew 4.2% to **$1.1 billion** (organic decline 3.3%), with operating earnings up significantly and adjusted EBITDA margin contracting - The company's strategy in Q2 focused on driving growth in resilient markets like K-12 staffing (Education), telecom/engineering (SET), and payroll outsourcing (ETM), while managing resources in areas with slower hiring[3](index=3&type=chunk) Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $1.1 billion | $1.06 billion | +4.2% | | Organic Revenue | - | - | -3.3% | | **Operating Earnings** | $22.2 million | $12.2 million | +82.0% | | Adjusted Operating Earnings | $24.6 million | $28.1 million | -12.4% | | **Adjusted EBITDA** | $37.0 million | $40.5 million | -8.7% | | Adjusted EBITDA Margin | 3.4% | 3.8% | -40 bps | | **Diluted EPS** | $0.52 | $0.12 | +333.3% | | Adjusted Diluted EPS | $0.54 | $0.71 | -23.9% | H1 2025 Key Financial Metrics (vs. H1 2024) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $2.3 billion | $2.1 billion | +7.8% | | Organic Revenue | - | - | -1.6% | | **Operating Earnings** | $33.0 million | $39.0 million | -15.4% | | Adjusted Operating Earnings | $46.7 million | $51.2 million | -8.8% | | **Adjusted EBITDA** | $71.9 million | $73.8 million | -2.6% | | Adjusted EBITDA Margin | 3.2% | 3.5% | -30 bps | | **Diluted EPS** | $0.67 | $0.83 | -19.3% | | Adjusted Diluted EPS | $0.93 | $1.26 | -26.2% | - The company expects a year-over-year revenue decline of **5% to 7%** in Q3, driven by reduced demand from U.S. federal contractors and certain large customers, but anticipates an adjusted EBITDA margin expansion of **80 to 90 bps** in Q3[7](index=7&type=chunk) [Corporate Developments](index=2&type=section&id=Corporate%20Developments) The company declared a quarterly cash dividend of **$0.075 per share** and appointed Nick Zuhlke as the new VP, Controller, and Chief Accounting Officer - The Board of Directors declared a quarterly dividend of **$0.075 per share**, payable on September 3, 2025, to stockholders of record as of August 20, 2025[9](index=9&type=chunk) - Effective August 11, 2025, Nick Zuhlke is appointed as the new Vice President, Controller, and Chief Accounting Officer, succeeding the retiring Laura Lockhart[11](index=11&type=chunk) Consolidated Financial Statements [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) Q2 2025 revenue increased 4.2% to **$1.1 billion**, with net earnings surging to **$19.0 million**, while H1 net earnings decreased 18.3% to **$24.8 million** Q2 Statement of Earnings Highlights (in millions) | Account | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue from services | $1,101.8 | $1,057.5 | 4.2% | | Gross profit | $225.5 | $213.7 | 5.5% | | Earnings from operations | $22.2 | $12.2 | 81.0% | | Net earnings | $19.0 | $4.6 | 314.7% | | Diluted EPS | $0.52 | $0.12 | 333.3% | H1 Statement of Earnings Highlights (in millions) | Account | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue from services | $2,266.7 | $2,102.6 | 7.8% | | Gross profit | $462.0 | $419.4 | 10.2% | | Earnings from operations | $33.0 | $39.0 | -15.5% | | Net earnings | $24.8 | $30.4 | -18.3% | | Diluted EPS | $0.67 | $0.83 | -19.3% | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$2.51 billion**, while long-term debt was significantly reduced to **$74.3 million**, improving the debt-to-capital ratio to **5.5%** Balance Sheet Summary (in millions) | Account | June 29, 2025 | Dec 29, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Cash and equivalents | $18.0 | $39.0 | $38.2 | | Total current assets | $1,253.1 | $1,365.5 | $1,310.8 | | **Total Assets** | **$2,511.9** | **$2,632.3** | **$2,628.2** | | Total current liabilities | $826.7 | $826.5 | $812.3 | | Long-term debt | $74.3 | $239.4 | $210.4 | | **Total Liabilities** | **$1,245.8** | **$1,397.7** | **$1,348.3** | | **Total stockholders' equity** | **$1,266.1** | **$1,234.6** | **$1,279.9** | | Working Capital | $426.4 | $539.0 | $498.5 | | Debt-to-capital % | 5.5% | 16.2% | 14.1% | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 net cash from operating activities significantly improved to **$119.3 million**, while financing activities used **$172.7 million** primarily for debt repayment H1 2025 Cash Flow Summary (in millions) | Cash Flow Category | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $119.3 | $32.2 | | Net cash from (used in) investing activities | $24.7 | $(353.1) | | Net cash used in (from) financing activities | $(172.7) | $201.6 | | **Net change in cash** | **$(21.1)** | **$(122.0)** | | Cash at end of period | $24.5 | $45.6 | - Year-to-date free cash flow was **$114.8 million**, a substantial increase from **$25.5 million** in the same period of 2024, driven by stronger operating cash flow[28](index=28&type=chunk)[42](index=42&type=chunk) Segment and Revenue Analysis [Segment Performance](index=6&type=section&id=Segment%20Performance) Q2 2025 saw strong revenue growth in SET (**19.4%**) and Education (**5.6%**), driven by acquisitions, while ETM revenue declined by **3.9%** [Enterprise Talent Management (ETM)](index=6&type=section&id=Enterprise%20Talent%20Management%20(ETM)) ETM revenue decreased by **3.9%** in Q2 and **1.0%** in H1 2025, with adjusted business unit profit falling **22.6%** in Q2 due to margin pressure ETM Segment Performance (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $520.2 | $541.2 | -3.9% | $1,054.2 | $1,065.3 | -1.0% | | Adjusted Business Unit Profit | $12.2 | $15.8 | -22.6% | $21.7 | $24.6 | -11.4% | [Science, Engineering & Technology (SET)](index=6&type=section&id=Science%2C%20Engineering%20%26%20Technology%20(SET)) SET revenue grew significantly by **19.4%** in Q2 and **28.6%** in H1 2025, primarily due to the MRP acquisition, with adjusted profit also increasing SET Segment Performance (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $317.3 | $265.7 | 19.4% | $639.7 | $497.3 | 28.6% | | Adjusted Business Unit Profit | $20.2 | $19.2 | 4.9% | $34.7 | $33.4 | 3.6% | [Education](index=6&type=section&id=Education) The Education segment continued steady growth, with revenue up **5.6%** in Q2 and **6.1%** in H1 2025, and adjusted business unit profit also increasing Education Segment Performance (in millions) | Metric | Q2 2025 | Q2 2024 | % Change | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $265.3 | $251.1 | 5.6% | $574.3 | $541.0 | 6.1% | | Adjusted Business Unit Profit | $13.7 | $12.7 | 7.9% | $33.0 | $30.8 | 7.1% | [Revenue from Services by Service Type](index=11&type=section&id=Revenue%20from%20Services%20by%20Service%20Type) Q2 2025 Staffing Services remained the largest revenue source at **$733.0 million**, while Permanent Placement revenue showed strong growth of **38.3%** Q2 Revenue by Service Type (in millions) | Service Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Staffing Services | $733.0 | $705.4 | +3.9% | | Outcome-based Services | $228.1 | $224.0 | +1.8% | | Talent Solutions | $126.9 | $117.9 | +7.6% | | Permanent Placement | $14.8 | $10.7 | +38.3% | H1 Revenue by Service Type (in millions) | Service Type | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Staffing Services | $1,526.5 | $1,420.1 | +7.5% | | Outcome-based Services | $470.7 | $442.2 | +6.4% | | Talent Solutions | $244.7 | $222.6 | +9.9% | | Permanent Placement | $26.3 | $18.7 | +40.6% | Reconciliation of Non-GAAP Measures [Reconciliation of Earnings and EPS](index=13&type=section&id=Reconciliation%20of%20Earnings%20and%20EPS) GAAP net earnings for Q2 2025 of **$19.0 million** were adjusted to **$19.8 million**, with adjusted diluted EPS at **$0.54**, reflecting exclusions for non-core items Q2 Reconciliation of Earnings from Operations (in millions) | Description | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **As reported (GAAP)** | **$22.2** | **$12.2** | | Integration and realignment costs | $6.1 | - | | Transaction costs | $0.1 | $1.6 | | (Gain) loss on sale of EMEA staffing | $(4.0) | $10.0 | | Other adjustments | $0.2 | $15.3 | | **Adjusted earnings from operations** | **$24.6** | **$28.1** | Q2 Reconciliation of Diluted EPS | Description | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **As reported (GAAP)** | **$0.52** | **$0.12** | | Adjustments (net of tax) | $0.02 | $0.59 | | **Adjusted net earnings per share** | **$0.54** | **$0.71** | [Reconciliation of Adjusted EBITDA](index=15&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) Q2 2025 Adjusted EBITDA decreased to **$37.0 million** (margin **3.4%**), and H1 Adjusted EBITDA was **$71.9 million**, with reconciliation starting from GAAP net earnings Reconciliation to Adjusted EBITDA (in millions) | Description | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net earnings (GAAP) | $19.0 | $4.6 | $24.8 | $30.4 | | Adjustments (Taxes, D&A, etc.) | $15.7 | $12.2 | $33.4 | $24.6 | | EBITDA | $34.7 | $16.8 | $58.2 | $55.0 | | Other specific adjustments | $2.3 | $23.7 | $13.7 | $18.8 | | **Adjusted EBITDA** | **$37.0** | **$40.5** | **$71.9** | **$73.8** | | **Adjusted EBITDA Margin** | **3.4%** | **3.8%** | **3.2%** | **3.5%** | [Explanation of Non-GAAP Adjustments](index=17&type=section&id=Explanation%20of%20Non-GAAP%20Adjustments) Non-GAAP adjustments enhance comparability by excluding non-core items, including 2025 integration and executive transition costs, and 2024 restructuring and asset impairment charges - **Integration and Realignment Costs (2025):** Totaled **$16.8 million** year-to-date, related to integrating MRP and other acquisitions, including IT charges, severance, and other fees[47](index=47&type=chunk) - **Transaction Costs (2024/2025):** Costs related to the sale of EMEA staffing operations and, in 2024, **$7.9 million** related to the MRP acquisition[47](index=47&type=chunk) - **Executive Transition Costs (2025):** Non-recurring expenses associated with the CEO transition[48](index=48&type=chunk) - **Restructuring Charges (2024):** Costs from a transformation initiative started in 2023 to streamline the operating model, including severance and execution costs[51](index=51&type=chunk) - **Asset Impairment Charge (2024):** A charge for right-of-use assets related to the leased headquarters facility due to changes in building utilization[52](index=52&type=chunk)

Revenue and Profitability - Revenue from services in Q1 2025 increased by 11.5% to $1,164.9 million compared to $1,045.1 million in Q1 2024, primarily driven by the acquisition of MRP[131] - Gross profit rose by 15.0% to $236.5 million, with a gross profit rate of 20.3%, an increase of 60 basis points from the previous year[131][133] - Net earnings for Q1 2025 were $5.8 million, a decrease of 77.7% from $25.8 million in Q1 2024[131] - The Science, Engineering & Technology segment saw a revenue increase of 39.2% to $322.4 million, driven by the MRP acquisition[138] - The Education segment's revenue increased by 6.6% to $309.0 million, reflecting improved demand despite weather-related school closures[138][141] Expenses and Costs - Total SG&A expenses increased by 18.5% to $225.7 million, largely due to the MRP acquisition, with integration and realignment costs of $10.7 million included[134] - Cash used for financing activities increased to $39.5 million in Q1 2025 from $4.7 million in Q1 2024, driven by net repayments of $34.8 million on credit facilities[165] Cash Flow and Working Capital - Cash, cash equivalents, and restricted cash totaled $34.5 million at the end of Q1 2025, down from $45.6 million at year-end 2024[161] - Net cash generated from operating activities was $23.9 million in Q1 2025, a significant improvement compared to a cash usage of $25.5 million in Q1 2024[162] - Trade accounts receivable reached $1.3 billion at the end of Q1 2025, with global Days Sales Outstanding (DSO) at 61 days, up from 59 days at year-end 2024[162] - The working capital position was $528.1 million at the end of Q1 2025, reflecting a decrease of $10.9 million from year-end 2024[163] - Cash generated from investing activities was $3.2 million in Q1 2025, a decline from $72.1 million in Q1 2024, primarily due to the sale of EMEA staffing operations in the previous year[164] Strategic Initiatives - The company is focused on integrating MRP's technology stack to modernize operations and enhance efficiency across its segments[123] - Strategic actions taken in Q1 2025 reflect the company's commitment to long-term profitability and resource alignment with customer demand[124] - The company completed the acquisition of MRP for $425.0 million, with an adjusted cash payment of $440.0 million[174] Financial Position and Ratios - The debt-to-total capital ratio improved to 14.2% at the end of Q1 2025, down from 16.2% at year-end 2024[166] - The company expects to meet cash requirements through operations, available cash, and credit facilities, including a $250.0 million accordion feature[170] - As of Q1 2025, the company had $120.0 million available on its $150.0 million revolving credit facility[175] Performance Metrics - EBITDA margin and other non-GAAP measures are used to assess cash flow generation and overall operating performance, with EBITDA being a key focus for the company[127] - Days sales outstanding (DSO) is calculated to reflect the average number of days sales remain unpaid, impacting cash flow management[128]

Revenue Performance - Q1 2025 revenue was $1.16 billion, an increase of 11.5% year-over-year, primarily due to the acquisition of Motion Recruitment Partners, LLC[5] - Organic revenue growth was 0.2%, with a 6.3% increase in the Education segment, while there was a 0.8% decline due to reduced demand for U.S. federal government contractors[6] - Total revenue from services for Q1 2025 was $1,164.9 million, representing an 11.5% increase from $1,045.1 million in Q1 2024[24] - Revenue from the Americas region increased to $1,139.9 million in Q1 2025, up 11.4% from $1,022.8 million in Q1 2024[25] - The Science, Engineering & Technology segment saw a revenue increase of 39.2% to $322.4 million, with a gross profit of $82.3 million[16] - The Education segment reported a revenue increase of 6.6% to $309.0 million, with a gross profit of $46.2 million[16] Earnings and Profitability - Q1 adjusted EBITDA was $34.9 million, up 4.8% year-over-year, with an adjusted EBITDA margin of 3.0%, a decrease of 20 basis points[5] - Q1 operating earnings were $10.8 million, down 59.8% from $26.8 million in Q1 2024; adjusted earnings were $22.1 million compared to $23.1 million in the prior year[6] - Earnings per share for Q1 2025 was $0.16, a decline from $0.70 in Q1 2024; adjusted earnings per share were $0.39 compared to $0.56 in the same quarter last year[6] - Adjusted earnings from operations for Q1 2025 were $22.1 million, slightly down from $23.1 million in Q1 2024[27] - Net earnings for Q1 2025 decreased to $5.8 million from $25.8 million in Q1 2024, a decline of 77.5%[20] - Adjusted net earnings for Q1 2025 were $14.3 million, down 29.6% from $20.3 million in Q1 2024[29] Cash Flow and Liquidity - Cash and equivalents at the end of Q1 2025 were $34.5 million, down from $208.9 million at the end of Q1 2024[20] - The company reported a net cash from operating activities of $23.9 million in Q1 2025, compared to a negative $25.5 million in Q1 2024[32] - The company experienced a net cash used in financing activities of $39.5 million in Q1 2025, compared to $4.7 million in Q1 2024[20] - Free cash flow for Q1 2025 was $21.4 million, a significant improvement from a negative $29.2 million in Q1 2024[32] - The current ratio for Q1 2025 was 1.6, compared to 1.8 in Q1 2024, indicating a decline in liquidity[18] Assets and Capital Structure - Total current assets decreased to $1,351.0 million in Q1 2025 from $1,436.8 million in Q1 2024, a decline of 6.0%[18] - The company reported a working capital of $528.1 million, down from $639.3 million in the previous year, a decrease of 17.4%[18] - Long-term debt increased to $204.6 million in Q1 2025 from $0 in Q1 2024, reflecting a significant change in capital structure[18] Future Outlook - The company expects year-over-year revenue growth of 6.0% to 7.0% in Q2 2025, with anticipated adjusted EBITDA margin decline of 20 to 30 basis points[5] - The company remains focused on efficiency and effectiveness to navigate the evolving macroeconomic environment and capitalize on future demand rebounds[3] Costs and Expenditures - Integration and realignment costs in Q1 2025 totaled $10.7 million, reflecting ongoing initiatives to integrate acquisitions[37] - The company incurred $0.4 million in transaction costs in Q1 2025, compared to $5.6 million in Q1 2024[31] - Capital expenditures in Q1 2025 were $2.5 million, a decrease from $3.7 million in Q1 2024[32]