Kelly Services (KELYA) investor relations material

Executive summary

• Q3 revenue was $927.2M, down 0.8% YoY, while underlying revenue grew 2.3%; sequential revenue performance improved for a third consecutive quarter.

• Adjusted EBITDA rose 29.1% to $21.3M, with a 2.3% margin, up 50 bps YoY; results exceeded the midpoint of guidance.

• Constructive demand and ETM and SET momentum were offset by Education enrollment pressure and slower conversion of therapy demand.

• Prior-year Q3 included a $102.0M non-cash goodwill impairment in SET, contributing to the reported operating earnings and net loss comparisons.

Financial highlights

• Gross profit was $194.4M, up 0.2% YoY; SG&A was $193.6M, down 0.4%.

• Adjusted operating earnings were $6.1M versus $4.3M; GAAP operating earnings were $0.6M versus a $102.1M loss.

• Net loss was $1.7M and diluted loss per share was $0.05; adjusted diluted EPS was $0.07 versus $0.17 YoY, reflecting discrete tax items.

• 9M revenue was $3,006.1M, down 6.1%; adjusted EBITDA was $68.2M, down 22.9%, and adjusted EPS was $0.46 versus $1.10.

• 9M operating cash flow was negative $30.7M and free cash flow was negative $35.0M.

Outlook and guidance

• Q4 revenue is expected flat to up 1% YoY, with adjusted EBITDA margin of 3.8%–4.0%, up 180–200 bps; guidance includes an extra fiscal week.

• The extra Q4 week is expected to add ~3 points to revenue growth versus prior year while weighing negatively on adjusted EBITDA.

• FY26 outlook remains a mid-single-digit revenue decline and adjusted EBITDA margin of 2.6%–2.7%, flat to up 10 bps YoY.

• Guidance assumes no material macroeconomic change; delayed Education recovery and near-term pressure from one ETM customer weigh on Q4 expectations.

• Core adjusted SG&A is projected to decline $25–$30M YoY, or ~4%, for FY26; management expects Education to pivot to growth in coming quarters.