Kelly Services (KELYA) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue increased 11.5% year-over-year to $1.16 billion, primarily driven by the Motion Recruitment Partners (MRP) acquisition, with organic revenue up 0.2% as Education and outcome-based solutions offset declines in SET and federal contractor demand.

• Integration of MRP and realignment of operating segments advanced, including the unification of OCG and P&I into ETM, with targeted cost actions and structural improvements to drive efficiency and future margin expansion.

• Education business remained strong with high fill rates, new customer wins, and robust demand for outcome-based solutions in semiconductors and renewables.

• Net earnings declined to $5.8 million from $25.8 million year-over-year, reflecting higher SG&A, integration, and interest costs related to acquisitions.

• Continued focus on expense management, high-margin specialty and education acquisitions, and operational synergies.

Financial highlights

• Q1 2025 revenue was $1.16 billion, up 11.5% year-over-year; organic revenue up 0.2%.

• Gross profit was $236.5 million, up 15.0%, with gross profit rate improving by 60 basis points to 20.3%.

• Adjusted EBITDA was $34.9 million, up 4.8% year-over-year; adjusted EBITDA margin declined 20 basis points to 3.0%.

• Net earnings were $5.8 million, down from $25.8 million; reported EPS was $0.16 (vs. $0.70 prior year); adjusted EPS was $0.39 (vs. $0.56 prior year), mainly due to acquisition-related debt and prior year gains.

• Free cash flow was $21.4 million, a significant improvement from negative $29.2 million in Q1 2024.

Outlook and guidance

• Q2 2025 revenue growth expected at 6%-7%, including a 1%-1.5% negative impact from reduced federal contractor demand and 1% from slower economic growth.

• Organic revenue for Q2 expected to be down 1%-2%, or roughly flat excluding federal and macro impacts.

• Adjusted EBITDA margin for Q2 expected to decline 20-30 basis points year-over-year, with margin expansion anticipated in Q3, Q4, and for the full year.

• Management remains focused on organic growth, efficiency, and margin expansion, with confidence in business resilience and operating model.