In This Article:
Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Kelly Services Inc (NASDAQ:KELYA) delivered organic revenue growth in line with expectations, outperforming the market.
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The education business remained strong, maintaining excellent fill rates and capturing new customer wins.
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Higher margin outcome-based solutions saw robust demand, particularly in the semiconductor and renewable sectors.
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The company implemented targeted actions to improve cost structure, contributing to expected EBITDA margin expansion.
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Integration of Motion Recruitment Partners (MRP) is expected to create synergies and enhance operational efficiency.
Negative Points
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There was a negative impact on revenue due to reduced demand for federal contractors, affecting the SET and ETM segments.
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The company faced ongoing integration charges related to IT and severance, impacting financial results.
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The macroeconomic environment is causing some clients to take a cautious approach, potentially tempering staffing market demand.
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Adjusted earnings per share declined compared to the prior year, primarily due to debt from the MRP acquisition.
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There is some pricing pressure in the professional and industrial space, with clients seeking cost savings.
Q & A Highlights
Q: Can you provide more details on the ongoing integration charges for the rest of the year? A: Troy Anderson, CFO, explained that they expect integration charges to be roughly the same size for the rest of the year, around $10.7 million per quarter. These charges are primarily IT-related and severance-related due to personnel actions. The integration involves consolidating prior acquisitions, not just MRP, and will continue into next year.
Q: What is the current status of your federal business, and do you expect it to continue downsizing? A: Troy Anderson noted that the federal business had about a 0.8% impact on Kelly's overall revenue in the quarter, mainly due to a significant contract with HHS. They expect a 1.5% impact in Q2 but hope to see opportunities to recover some of that as the year progresses.
Q: How is the M&A environment currently, and are you seeing any improvements in valuations? A: Peter Quigley, CEO, mentioned that the number of properties available is significantly down, and there hasn't been a significant reduction in seller expectations. Kelly will be intentional in deploying capital, particularly in the therapy space, to augment their education business.