Kelly Services reported third-quarter revenue of about $900 million, down 0.8% from a year earlier. The staffing and talent-solutions company said revenue trends improved for a third consecutive quarter, with underlying revenue growth after excluding specified customer and federal-government-related impacts.
Operating earnings were $0.6 million, or $6.1 million on an adjusted basis. Adjusted EBITDA was $21.3 million, and its margin widened from a year earlier as gross profit improved and the company maintained discipline on selling, general and administrative costs.
Key details
- Underlying revenue grew 2.3%. The reported 0.8% decline included an estimated 3.1 percentage-point drag from lower demand for U.S. federal government contractors in the SET segment and reduced business from three large commercial customers in ETM. Kelly’s underlying measure excludes those impacts.
- ETM returned to year-over-year growth. The segment’s underlying revenue rose 7.7%, while reported revenue increased 2.4%. Its underlying performance improved by 460 basis points from the prior quarter.
- SET continued to improve sequentially, but remained below year-ago levels. Underlying revenue fell 0.8%, compared with a reported decline of 2.0%. Its underlying performance improved by 220 basis points from the prior quarter.
- Adjusted EBITDA margin expanded. Adjusted EBITDA was $21.3 million, equal to 2.3% of revenue; the margin was 50 basis points higher than a year earlier. Kelly attributed the improvement to a better gross profit rate and continued control of overhead costs.
- Results exceeded the midpoint of management’s guidance. CEO Chris Layden cited progress on growth and efficiency efforts and increasingly constructive demand trends. He said ETM’s return to year-over-year revenue growth and another sequential improvement in SET helped drive the quarter’s performance.
What changes for investors
The quarter showed a clearer split between the two businesses: ETM posted positive reported growth, while SET’s revenue still declined year over year but improved sequentially. The gap between reported and underlying results also reflects the impact of the specific customer and federal-demand pressures Kelly identified. Adjusted EBITDA margin improved even as reported revenue slipped.