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% sequentially, indicating stabilization in staffing demand; transformation initiatives and the MRP acquisition drove margin expansion and market share gains.

• Adjusted EBITDA margin improved to 3.8%, up 180 bps year-over-year, with further expansion expected from the MRP acquisition.

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

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

• Transformation and restructuring initiatives delivered targeted cost reductions, improved efficiency, and supported margin expansion.

Financial highlights

• Q2 2024 revenue was $1.06 billion, down 13.1% year-over-year due to the sale of European staffing business; organic revenue up 0.6%.

• Adjusted earnings from operations nearly doubled to $28.1 million from $14.2 million in Q2 2023; adjusted EBITDA was $40.5 million (3.8% margin), up 64.3% year-over-year.

• Adjusted EPS was $0.71, up from $0.36 in Q2 2023; reported EPS was $0.12, impacted by one-time charges.

• Gross profit rate improved to 20.2% from 19.8% in Q2 2023.

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

Outlook and guidance

• Organic revenue expected to grow 2.5%-3.5% in H2 2024, with Education segment continuing double-digit growth despite Q3 seasonality; MRP expected to add $260-$270 million in H2 revenue.

• Adjusted organic EBITDA margin expected at 3.2%-3.3% in H2, with MRP contributing an additional 30 bps; effective tax rate projected in the low teens.

• Management expects further EBITDA margin expansion from the MRP acquisition and ongoing transformation initiatives.