Summary of Kelly Services Q2 2026 Earnings Call

1Key Financial Results and Metrics

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

Adjusted EBITDA: $31.1 million with a margin of 3%, exceeding guidance of at least 2.5%.

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 stable at 20.4%.

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

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

Liquidity: Total available liquidity of $303 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.

Talent Solutions: Grew approximately 6%, benefiting from recent MSP wins.

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

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

Technology Modernization: Successful cutover to a unified AI-powered CRM platform, enhancing operational efficiency and cross-selling opportunities.

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

3Forward Guidance and Outlook

Q3 Expectations: Anticipate underlying revenue growth of 1% to 2%, with total revenue flat to a decline of 2% year-over-year. Adjusted EBITDA margin expected to improve by 40 to 50 basis points.

Q4 Expectations: Project mid- to upper single-digit revenue growth and approximately 200 basis points of year-over-year adjusted EBITDA margin expansion, benefiting from an extra fiscal week.

Full Year Outlook: Expect low to mid-single-digit total revenue decline but 10 to 20 basis points of year-over-year improvement in adjusted EBITDA margin.

4Bad News, Challenges, or Points of Concern

Revenue Decline: Overall revenue decreased by 5.8% year-over-year, indicating ongoing challenges in certain segments.

Education Segment Pressures: Continued impacts from delayed contract decisions and reduced demand due to enrollment declines in K-12 education.

SET Segment: Despite recent improvements, underlying revenue still declined 3% year-over-year, indicating ongoing challenges.

Market Risks: Potential macroeconomic uncertainties could impact future performance, particularly in the Education segment.

5Notable Q&A Insights

Education Business: Management emphasized that current pressures are not structural, with optimism about new wins and renewals as the new school year approaches.

SET Leadership Impact: The new leadership under Joel is showing positive results, with broad-based improvements across all specialty areas.

Market Recovery: Management believes the company is in the early stages of recovery, with improving operational indicators and customer sentiment.

Cash Usage: Focus on debt reduction and maintaining flexibility for potential inorganic growth opportunities, with a strong balance sheet to support strategic initiatives. Overall, Kelly Services demonstrated resilience in the face of challenges, with strategic initiatives showing promise for future growth, although certain segments still face headwinds.