Kelly Services(US:KELYA)2025-11-06 19:32Revenue 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].