Kelly Services (KELYA) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue declined 7.1% year-over-year to $1.04 billion, mainly due to the sale of European staffing operations; organic revenue was nearly flat at -0.2%, with MRP acquisition contributing to reported growth.

• Gross profit rate improved to 21.4% (up 100 bps), aided by portfolio changes and the MRP acquisition.

• Adjusted EBITDA margin was 2.5%, up 20 bps year-over-year, with MRP contributing to margin gains.

• Net earnings for Q3 were $0.8 million ($0.02 per share), with adjusted EPS at $0.21, both down from Q3 2023.

• Transformation initiatives and portfolio optimization (EMEA sale, MRP acquisition, Ayers Group sale) are expected to drive long-term EBITDA margin improvement.

Financial highlights

• Q3 gross profit was $221.7 million, down 3% year-over-year; gross profit rate improved to 21.4% from 20.4%.

• Adjusted EBITDA for Q3 was $26.2 million (2.5% margin), up from $25.5 million (2.3%) in Q3 2023.

• SG&A expenses declined 4.1% year-over-year; adjusted organic SG&A down 4%.

• Free cash flow for the nine months was $2.8 million, down from $21.0 million last year.

• Year-to-date revenue fell 12.8% to $3.14 billion; net earnings rose 24.6% to $31.2 million.

Outlook and guidance

• Q4 organic revenue expected to grow 1.5%-2.5% year-over-year, with MRP adding $120 million.

• Organic gross profit rate for Q4 projected at 19.3%; total GP rate expected at 20.4% with MRP.

• Adjusted EBITDA margin for Q4 forecasted at 3.4%-3.5%, up 90 basis points year-over-year.

• Management expects continued EBITDA margin improvement from transformation and portfolio actions.

• Focus remains on higher-margin, higher-growth specialties and operational efficiency.