KELYA — Kelly Services, Inc.

Summary of KELYA Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Revenue: Q4 revenue totaled $1.1 billion, down 11.9% year-over-year, or down 3.9% on an underlying basis when excluding discrete impacts.
• Full Year Revenue: Total revenue for FY 2025 was $4.25 billion, a decline of 1.9% overall.
• Gross Profit: Reported gross profit was $197 million, down 18.4% year-over-year, with a gross profit margin of 18.8%, a decrease of 150 basis points.
• Loss Per Share: Reported loss per share was $3.69 for Q4 and $7.24 for the full year, impacted by goodwill impairments and tax valuation allowances.
• Adjusted Earnings Per Share: Q4 adjusted EPS was $0.16, down from $0.79 the previous year.
• Adjusted EBITDA: Q4 adjusted EBITDA was $21 million, with a margin of 2%, down 170 basis points year-over-year.

2. Strategic Updates and Business Highlights

• Acquisition and Leadership Changes: Kelly Services entered an agreement with Hunt Companies for a controlling stake, leading to a reconstitution of the board with four new members. Pat McCall was appointed as Chief Growth Officer to enhance growth strategies.
• Technology Modernization: Successful transition of SET acquisitions to a modernized technology platform, enhancing productivity and data insights.
• AI Integration: Launched "Grace Boost," an internal AI platform to streamline recruiting processes, which has shown positive results in customer satisfaction and efficiency.
• Customer-Centric Approach: Emphasis on aligning resources with customer demand and enhancing service delivery, particularly in Education and telecom sectors.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipate Q1 revenue to decline 11-13% year-over-year, with a similar underlying decline of 3-5%.
• Gradual Improvement: Forecast modest revenue growth in the second half of 2026, with expectations for adjusted EBITDA margin expansion as the year progresses.
• Growth Focus: Plans to leverage organic growth drivers across segments, particularly in Education and high-growth areas within SET.

4. Bad News, Challenges, or Points of Concern

• Declining Revenue: Continued revenue decline due to reduced demand from federal government contracts and three major customers, with potential further reductions expected in 2026.
• Margin Pressure: Increased employee-related costs and business mix changes contributed to gross profit margin decline, with specific pressures noted in ETM and SET segments.
• Market Headwinds: Ongoing cautious hiring environment and demand pressures in IT and other specialties, particularly due to AI-driven productivity increases reducing demand for certain roles.

5. Notable Q&A Insights

• Hunt Companies' Role: Management expressed optimism about Hunt's active involvement and alignment with Kelly's growth strategy, assuring no major changes to existing client relationships or strategic initiatives.
• SET Business Trends: Despite a 5.4% decline in SET revenue, management noted growth in telecom and Life Sciences, with expectations for improvement as the year progresses.
• AI's Impact: Management believes AI will have a net positive impact on demand for services while enhancing operational efficiency and productivity.
• Growth Strategy: The new Chief Growth Officer is expected to unify and strengthen Kelly's market approach, focusing on large enterprise accounts and expanding customer acquisition.

Overall, while KELYA faces significant challenges with declining revenues and margin pressures, strategic initiatives in technology modernization, AI integration, and a renewed focus on growth present opportunities for recovery and improvement in 2026.