Kelly Services(KELYA) - 2026 Q2 - Quarterly Results

Q2 2025 Earnings Overview Financial Highlights 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] 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] Corporate Developments 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] - Effective August 11, 2025, Nick Zuhlke is appointed as the new Vice President, Controller, and Chief Accounting Officer, succeeding the retiring Laura Lockhart[11] Consolidated Financial Statements Consolidated Statements of Earnings 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 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 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][42] Segment and Revenue Analysis Segment Performance 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) 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) 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 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 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 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 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 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] - 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] - Executive Transition Costs (2025): Non-recurring expenses associated with the CEO transition[48] - Restructuring Charges (2024): Costs from a transformation initiative started in 2023 to streamline the operating model, including severance and execution costs[51] - Asset Impairment Charge (2024): A charge for right-of-use assets related to the leased headquarters facility due to changes in building utilization[52]