KELYB — Kelly Services, Inc.

Summary of Kelly Services Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $1 billion, down 10.7% year-over-year; adjusted for specific impacts, revenue declined 3.3%, showing a 60 basis point improvement from the previous quarter.
• Adjusted EBITDA: $15.8 million, with an adjusted EBITDA margin of 1.5%, down 150 basis points year-over-year but in line with expectations.
• Gross Profit: $196.4 million, down 17% year-over-year; gross profit rate at 18.9%, a decrease of 140 basis points.
• SG&A Expenses: Reported at $199.3 million, down 11.7% year-over-year; adjusted SG&A decreased 10.3%.
• Loss Per Share: Reported at $0.17; adjusted EPS was $0.03, down from $0.39 in the prior year.
• Cash Flow: Utilized $25.4 million from operations due to working capital timing; total liquidity of $252 million.

2. Strategic Updates and Business Highlights

• Segment Performance:
  • ETM (Employment and Talent Management) saw a slight decline of 0.4% year-over-year but improved sequentially.
  • SET (Science, Engineering, and Technology) revenue declined 6%, primarily due to demand pressures in technology.
  • Education segment decreased 4.8% due to delayed contract decisions and enrollment declines.
• New Business Wins: Notable new customer acquisition in the oil and gas sector, leveraging technology capabilities.
• Growth Office: Established to enhance the commercial operating framework and align resources for better market execution.
• Technology Modernization: Progressing with a multi-phase approach, including a new unified CRM system expected to be fully implemented by mid-year.

3. Forward Guidance and Outlook

• Q2 Expectations: Anticipating a revenue decline of 7% to 9%, with at least 100 basis points improvement in underlying decline. Expecting adjusted EBITDA margin of at least 2.5%.
• Full Year Outlook: Projecting modest revenue growth in the second half of the year, with expectations for year-over-year margin expansion.

4. Challenges and Points of Concern

• Declining Revenue: Overall revenue decline of 10.7% reflects ongoing market pressures and specific customer demand reductions.
• Education Segment Pressures: Continued enrollment declines and weather-related closures impacting performance.
• Market Conditions: Cautious hiring environment and mixed labor market conditions affecting overall demand.
• Integration and Transition Costs: Ongoing charges related to restructuring and technology modernization efforts may impact short-term profitability.

5. Notable Q&A Insights

• Cost Improvements: Management emphasized a $25 million reduction in core SG&A expenses, with ongoing efforts to align resources with demand.
• Technology Initiatives: Upcoming phases of technology integration and the new CRM system are expected to enhance operational efficiency and visibility.
• Demand Drivers: Positive signals in consultant counts and sequential improvement in certain segments, particularly telecom and engineering, were noted.
• Customer Relationships: Focus on enhancing customer engagement and total talent management solutions as a competitive differentiator.

Overall, while Kelly Services is navigating a challenging macroeconomic environment with declining revenues, strategic initiatives in technology and customer engagement are expected to drive future growth and operational efficiency.