Kelly Services (KELYA) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue declined 13.1% year-over-year due to the sale of European staffing operations, but organic revenue grew 0.6% and demand stabilized, especially in technology and life sciences.

• Transformation initiatives and omni-channel strategies drove market share gains, expense efficiencies, and improved fill rates, with adjusted EBITDA margin rising to 3.8%.

• Acquisition of Motion Recruitment Partners (MRP) completed in May 2024, contributed positively to gross/net margins and is expected to further expand EBITDA margin.

• Strategic focus shifted to North American staffing and global MSP/RPO solutions following divestitures and acquisitions.

• Net earnings for Q2 2024 were $4.6M, down from $7.5M in Q2 2023; year-to-date net earnings rose to $30.4M from $18.4M.

Financial highlights

• Q2 2024 revenue was $1,057.5M–$1.06B, down 13.1% year-over-year; organic revenue up 0.6%.

• Adjusted earnings from operations nearly doubled to $28.1M from $14.2M year-over-year; adjusted EBITDA was $40.5M (3.8% margin), up 64.3%.

• Adjusted EPS was $0.71, up from $0.36 in Q2 2023.

• Gross profit rate improved to 20.2% from 19.8% year-over-year.

• Free cash flow was $55M, up from $32M in the prior year.

Outlook and guidance

• Organic revenue expected to grow 2.5%–3.5% in H2 2024, with Education segment maintaining double-digit growth.

• MRP expected to add $260M–$270M in H2 revenue.

• All-in gross profit rate projected at 21%–21.2% in H2, with organic GP rate at 20%–20.2%.

• Adjusted organic EBITDA margin forecasted at 3.2%–3.3%, with MRP adding 30 bps; effective tax rate expected in the low teens.

• Management expects continued EBITDA margin improvement as transformation and portfolio optimization efforts take hold.