Kelly Services (NasdaqGS:KELY.A) FY Conference Transcript

Summary of Kelly Services FY Conference Call Company Overview - Company: Kelly Services (NasdaqGS: KELY.A) - Industry: Staffing Solutions - Segments: Enterprise Talent Management, Science, Engineering and Technology (SET), Education - Market Position: Second largest temporary staffing provider in the U.S. with a 2% market share [4][18] Key Financial Metrics - Trailing 12-Month Revenue: $4.4 billion [4] - Adjusted EBITDA Margin: 3% [4] - Capital Deployment: $500 million in non-core asset monetization; $900 million redeployed for scale in specialties [2] - SG&A Cost Reduction: Over $100 million [2] Strategic Initiatives - Transformation: Significant transformation ongoing, including a streamlined operating model and a focus on higher-value solutions [5][20] - Leadership Changes: New CEO Chris Laden, an industry veteran, joined in September; first outside CEO in company history [6][7] - Acquisitions: $900 million invested in acquisitions, including a $450 million IT services company [13] Segment Performance Enterprise Talent Management (ETM) - Accounts for nearly half of the business with a gross margin of around 20% and EBITDA margin over 2% [8] - Offers a range of solutions including temp staffing, perm staffing, and managed services [9] Science, Engineering, and Technology (SET) - Focused on higher-value positions and solutions, with a gross margin of 26% and EBITDA margin of nearly 6% [14] - Significant growth in project-based work, particularly in telecom and life sciences [12][13] Education - Largest provider of K-12 substitute teachers in the U.S., supporting 8,000 school districts [14] - Business has tripled over the last five years, with a significant growth opportunity as only 30% of school districts currently outsource [15] Market Dynamics - The staffing industry is fragmented, with Kelly Services maintaining a flat revenue despite a declining overall market [19][20] - Shift from staffing to outcome-based solutions, with revenue from staffing decreasing from 70% to 44% [21] Financial Outlook - Anticipated EBITDA margin to remain around 3% amid near-term headwinds [24] - Free cash flow generation of approximately $100 million [26] - Active M&A pipeline with a focus on education and SET areas [27] Additional Insights - The company is focusing on optimizing its finance, HR, and technology functions to drive efficiency [29] - Emphasis on expanding wallet share with existing clients and enhancing service offerings [28] - The company has a dual-class share structure, with B shares having voting rights [42] Conclusion - Kelly Services is undergoing a significant transformation aimed at enhancing shareholder value through strategic acquisitions, operational efficiencies, and a focus on higher-margin segments. The company is well-positioned to capitalize on growth opportunities in the staffing industry, particularly in education and specialized sectors.