Kelly Services(KELYA) - 2026 Q1 - Quarterly Results

Q1 2025 Earnings Overview Kelly reported first-quarter 2025 revenue of $1.16 billion, an 11.5% increase year-over-year, primarily driven by the acquisition of Motion Recruitment Partners (MRP) Q1 2025 Financial Highlights (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1.16B | $1.05B | +11.5% | | Organic Revenue Growth | +0.2% | N/A | N/A | | Operating Earnings | $10.8M | $26.8M | -59.8% | | Adjusted Operating Earnings | $22.1M | $23.1M | -4.3% | | Adjusted EBITDA | $34.9M | $33.3M | +4.8% | | Adjusted EBITDA Margin | 3.0% | 3.2% | -20 bps | | Diluted EPS | $0.16 | $0.70 | -77.1% | | Adjusted EPS | $0.39 | $0.56 | -30.4% | - Revenue growth was primarily driven by the May 2024 acquisition of Motion Recruitment Partners, LLC (MRP) while organic growth of 0.2% was achieved despite a 0.8% decline from reduced demand for U.S. federal government contractors, offset by 6.3% growth in the Education segment[6] - The company expects Q2 2025 year-over-year revenue growth of 6.0% to 7.0%, with an anticipated adjusted EBITDA margin decline of 20 to 30 bps, though margin expansion is expected in Q3, Q4, and for the full year[5] - The Board of Directors declared a quarterly dividend of $0.075 per share, payable on June 3, 2025, to stockholders of record as of May 19, 2025[7] Consolidated Financial Statements This section provides a detailed overview of the company's financial position, performance, and cash flows for the reported period Consolidated Statements of Earnings In Q1 2025, revenue increased by 11.5% to $1.16 billion, and gross profit grew by 15.0% to $236.5 million compared to Q1 2024 Q1 2025 vs. Q1 2024 Statement of Earnings (in millions) | Account | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue from services | $1,164.9 | $1,045.1 | 11.5% | | Gross profit | $236.5 | $205.7 | 15.0% | | SG&A expenses | $225.7 | $190.5 | 18.5% | | Earnings from operations | $10.8 | $26.8 | -59.8% | | Net earnings | $5.8 | $25.8 | -77.7% | | Diluted earnings per share | $0.16 | $0.70 | -77.1% | Consolidated Balance Sheets As of March 30, 2025, total assets stood at $2.59 billion, reflecting the impact of the MRP acquisition, with Goodwill increasing to $304.1 million and long-term debt at $204.6 million Key Balance Sheet Items (in millions) | Account | Mar 30, 2025 | Dec 29, 2024 | Mar 31, 2024 | | :--- | :--- | :--- | :--- | | Cash and equivalents | $28.2 | $39.0 | $200.7 | | Total current assets | $1,351.0 | $1,365.5 | $1,436.8 | | Goodwill | $304.1 | $304.2 | $151.1 | | Total Assets | $2,594.9 | $2,632.3 | $2,395.4 | | Long-term debt | $204.6 | $239.4 | $0.0 | | Total liabilities | $1,354.4 | $1,397.7 | $1,118.6 | | Total stockholders' equity | $1,240.5 | $1,234.6 | $1,276.8 | Financial Ratios | Ratio | Mar 30, 2025 | Mar 31, 2024 | | :--- | :--- | :--- | | Current Ratio | 1.6 | 1.8 | | Debt-to-capital % | 14.2% | 0.0% | Consolidated Statements of Cash Flows For the first quarter of 2025, Kelly generated $23.9 million in cash from operating activities, a significant turnaround from a $25.5 million use of cash in the same period last year Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from (used in) operating activities | $23.9 | $(25.5) | | Net cash from investing activities | $3.2 | $72.1 | | Net cash used in financing activities | $(39.5) | $(4.7) | | Net change in cash | $(11.1) | $41.3 | - Year-to-date free cash flow improved significantly to $21.4 million in Q1 2025 from an outflow of $29.2 million in Q1 2024[18][32] Segment and Revenue Analysis This section details the company's revenue performance across different business segments and geographical regions Segment Information The Science, Engineering & Technology (SET) segment's revenue grew 39.2% YoY to $322.4 million, largely due to acquisitions, while the Education segment continued its steady growth, with revenue up 6.6% to $309.0 million Q1 2025 Segment Performance (in millions) | Segment | Revenue | Revenue % Change | Business Unit Profit | Profit % Change | | :--- | :--- | :--- | :--- | :--- | | Enterprise Talent Management | $534.0 | 1.9% | $6.8 | -15.4% | | Science, Engineering & Technology | $322.4 | 39.2% | $13.4 | -5.8% | | Education | $309.0 | 6.6% | $19.3 | 6.2% | Revenue from Services by Service Type In Q1 2025, traditional Staffing Services constituted the largest portion of revenue at $793.5 million, with growth also seen in Outcome-based Services and Talent Solutions Q1 Revenue by Service Type (in millions) | Service Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Staffing Services | $793.5 | $714.7 | | Outcome-based Services | $242.6 | $218.2 | | Talent Solutions | $117.8 | $104.7 | | Permanent Placement | $11.5 | $8.0 | | Total Segment Revenue | $1,165.4 | $1,045.6 | Revenue from Services by Geography The Americas region drove the company's growth, with revenue increasing 11.4% to $1.14 billion in Q1 2025, primarily led by the United States market, which grew by 13.2% Q1 Revenue by Geography (in millions) | Region | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | United States | $1,056.6 | $933.6 | 13.2% | | Total Americas Region | $1,139.9 | $1,022.8 | 11.4% | | Total Europe Region | $9.6 | $10.8 | -11.0% | | Total Asia-Pacific Region | $15.4 | $11.5 | 34.3% | | Total Kelly Services, Inc. | $1,164.9 | $1,045.1 | 11.5% | Reconciliation of Non-GAAP Measures The company provided detailed reconciliations of GAAP to non-GAAP financial measures to exclude items such as integration costs, transaction costs, and a prior-year gain on sale, aiming to improve comparability - Management believes non-GAAP measures are useful for understanding financial performance and comparability by removing the impact of items like integration costs ($10.7 million), transaction costs, and prior-period gains[34] Reconciliation of GAAP to Adjusted Net Earnings and EPS (Q1 2025) | Metric | As Reported (GAAP) | Adjustments | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Earnings | $5.8M | $8.5M | $14.3M | | Diluted EPS | $0.16 | $0.24 | $0.39 | Reconciliation of Net Earnings to Adjusted EBITDA (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net earnings (GAAP) | $5.8 | $25.8 | | EBITDA | $23.5 | $38.2 | | Adjustments | $11.4 | $(5.0) | | Adjusted EBITDA | $34.9 | $33.3 | | Adjusted EBITDA Margin | 3.0% | 3.2% | - Q1 2025 integration and realignment costs totaled $10.7 million, primarily consisting of $5.3 million in IT-related charges and $4.4 million in severance[37]