Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kelly Services Inc (KELYA, Financial) delivered organic revenue growth in line with expectations, outperforming the market.
- The education business remained strong, maintaining excellent fill rates and capturing new customer wins.
- Higher margin outcome-based solutions saw robust demand, particularly in the semiconductor and renewable sectors.
- The company implemented targeted actions to improve cost structure, contributing to expected EBITDA margin expansion.
- Integration of Motion Recruitment Partners (MRP) is expected to create synergies and enhance operational efficiency.
Negative Points
- There was a negative impact on revenue due to reduced demand for federal contractors, affecting the SET and ETM segments.
- The company faced ongoing integration charges related to IT and severance, impacting financial results.
- The macroeconomic environment is causing some clients to take a cautious approach, potentially tempering staffing market demand.
- Adjusted earnings per share declined compared to the prior year, primarily due to debt from the MRP acquisition.
- There is some pricing pressure in the professional and industrial space, with clients seeking cost savings.
Q & A Highlights
Q: Can you provide more details on the ongoing integration charges for the rest of the year?
A: Troy Anderson, CFO, explained that they expect integration charges to be roughly the same size for the rest of the year, around $10.7 million per quarter. These charges are primarily IT-related and severance-related due to personnel actions. The integration involves consolidating prior acquisitions, not just MRP, and will continue into next year.
Q: What is the current status of your federal business, and do you expect it to continue downsizing?
A: Troy Anderson noted that the federal business had about a 0.8% impact on Kelly's overall revenue in the quarter, mainly due to a significant contract with HHS. They expect a 1.5% impact in Q2 but hope to see opportunities to recover some of that as the year progresses.
Q: How is the M&A environment currently, and are you seeing any improvements in valuations?
A: Peter Quigley, CEO, mentioned that the number of properties available is significantly down, and there hasn't been a significant reduction in seller expectations. Kelly will be intentional in deploying capital, particularly in the therapy space, to augment their education business.
Q: Are the margin benefits from MRP in line with expectations, and do you see further improvement opportunities?
A: Troy Anderson stated that while there are improvement opportunities, the earnout period has restricted some actions. As they progress with integration and create a go-to-market organization, they expect significant margin improvements in the SET business.
Q: Can you elaborate on the demand opportunities in the semiconductor and renewable sectors?
A: Peter Quigley highlighted that Kelly has focused on high-growth areas like semiconductors and renewables. They have established expertise in semiconductor manufacturing and engineering, which has led to new business opportunities. These sectors are expected to provide long-term growth despite some current uncertainties.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
