KELYA Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: $1.04 billion, down 5.8% year-over-year but better than the guidance of a 7% to 9% decline.

Adjusted EBITDA: $31.1 million with a margin of 3%, exceeding guidance of at least 2.5% and showing a 150 basis point improvement from Q1.

Diluted EPS: Reported at $0.31; adjusted EPS at $0.37, down from $0.54 in the prior year.

Gross Profit: $212 million, down 6% year-over-year; gross profit rate at 20.4%, stable year-over-year and improved sequentially.

SG&A Expenses: Reported at $195.9 million, down 5.5% year-over-year; adjusted SG&A at $192.7 million, down 4.1%.

Free Cash Flow: Generated $47.7 million during the quarter; total debt reduced by $52.4 million to $78.1 million.

2Strategic Updates and Business Highlights

Growth Initiatives: Positive momentum from growth and efficiency initiatives; adjusted EBITDA margin returned to 3%.

Segment Performance:

ETM: Underlying revenue grew 3.1% year-over-year; strong demand across various clients.

Talent Solutions: Grew approximately 6% due to new wins and demand in RPO and MSP.

SET: Revenue grew sequentially for the first time in two years, with significant contributions from outcome-based solutions.

Education: Strong sales cycle with a 100% renewal rate; new customer wins expected to contribute in Q3.

Technology Modernization: Successful implementation of a unified CRM platform powered by AI to enhance transparency and cross-selling opportunities.

Leadership Changes: Appointment of Alan Stukalsky as Chief Product and Technology Officer to align technology and product strategy.

3Forward Guidance and Outlook

Q3 Expectations: Anticipated total revenue to be flat to a decline of 2% year-over-year; underlying revenue growth expected at 1% to 2%. Adjusted EBITDA margin projected in the low 2% range.

Q4 Expectations: Anticipated mid- to upper single-digit revenue growth and approximately 200 basis points of year-over-year adjusted EBITDA margin expansion, resulting in a margin of about 4%.

Full Year Outlook: Expecting low to mid-single-digit total revenue decline and 10 to 20 basis points improvement in adjusted EBITDA margin.

4Bad News, Challenges, or Points of Concern

Revenue Decline: Overall revenue declined 5.8% year-over-year, with specific segments like Education facing challenges due to delayed contract decisions and reduced demand.

Market Conditions: Ongoing impacts from the federal government and large ETM customers have created headwinds, although demand has stabilized.

Profitability Concerns: Adjusted EPS declined from the previous year, reflecting lower profitability and a normalized effective tax rate.

Seasonality Effects: Q3 is expected to be the lowest revenue quarter due to the seasonal nature of the education business.

5Notable Q&A Insights

Education Business: Management emphasized that the decline is not structural, with expectations for recovery in the second half of the year driven by new wins and strong renewal rates.

SET Leadership: The new leadership in SET is expected to drive growth, with improvements seen across all specialty areas and a strong solutions pipeline.

Market Recovery: Management believes the company has moved beyond stabilization into early recovery, with improving demand trends and operational indicators.

Cash Usage Prioritization: Focus on debt paydown with excess cash; potential for inorganic growth opportunities as the market stabilizes.

Therapy Services Growth: Therapy services are seen as a significant growth opportunity, expected to expand as part of the overall education offering. This summary encapsulates the key elements of KELYA's Q2 2026 earnings call, highlighting both achievements and challenges faced by the company.