KELYA — 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%, an improvement from previous quarters.
• Gross Profit: $196.4 million, down 17% year-over-year; gross profit margin 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.
• Adjusted EBITDA: $15.8 million with a margin of 1.5%, down 150 basis points year-over-year.
• Cash Flow: Utilized $25.4 million in cash from operations; total liquidity of $252 million.

2. Strategic Updates and Business Highlights

• Market Conditions: The labor market remains mixed, with cautious hiring from employers.
• Segment Performance:
  • ETM (Enterprise Talent Management): Underlying revenue declined 0.4%, with improvements in talent solutions.
  • SET (Science, Engineering, and Technology): Underlying revenue down 6%, but sequential improvements noted.
  • Education: Revenue decreased 4.8% due to delayed contracts and enrollment declines.
• New Wins: Secured a significant MSP program with a leading oil and gas company, highlighting the effectiveness of Kelly's technology-enabled capabilities.
• Growth Office: Established to enhance commercial operations and align resources with demand, including a migration to a unified CRM system expected by mid-year.
• Leadership Changes: Joel Leege appointed as President of SET; ongoing evaluation of ETM leadership.

3. Forward Guidance and Outlook

• Q2 Expectations: Revenue decline projected at 7% to 9%, with an underlying decline improvement of at least 100 basis points; adjusted EBITDA margin expected to improve to at least 2.5%.
• Full Year Outlook: Anticipation of modest revenue growth in the second half of the year, with a mid-single-digit decline expected for the full year. Adjusted EBITDA margins expected to expand.

4. Bad News, Challenges, or Points of Concern

• Revenue Declines: Significant year-over-year revenue drop, particularly in the Education segment and pressures in SET.
• Gross Margin Pressure: Declines attributed to lower revenue volume and changes in business mix.
• Customer Demand: Continued cautious approach to hiring from employers, particularly affecting the technology sector.
• External Factors: Delayed contract decisions and weather-related impacts in Education; reliance on federal government demand remains a concern.

5. Notable Q&A Insights

• Cost Improvements: Management highlighted a $25 million reduction in core SG&A expenses, with expectations for continued efficiency as the company pivots to growth.
• Technology Initiatives: Upcoming phases of technology modernization, including a new enterprise platform by Q4 2026.
• Demand Drivers: Some positive signals in consultant counts and sequential improvements in various segments, particularly in telecom and engineering.
• Customer Relationships: Emphasis on strengthening customer relationships and total talent management solutions as a key differentiator moving forward.

Overall, while Kelly Services faces challenges with declining revenues and cautious market conditions, strategic initiatives and operational efficiencies are being implemented to position the company for future growth.