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 the MRP acquisition contributing 11.2% to reported growth.

• Strategic focus on North American specialty staffing and global RPO/MSP, with integration of Motion Recruitment Partners (MRP) driving higher margins and expected synergies post-earnout in Q2 2025.

• Transformation initiatives, portfolio optimization, and efficiency actions (including the EMEA and Ayers Group sales) are expected to drive long-term EBITDA margin improvement.

• Net earnings for Q3 were $0.8 million ($0.02 per share), with adjusted EPS at $0.21 versus $0.50 last year; board declared a $0.075 per share dividend for Q4.

• Leadership transition announced, with Troy Anderson to succeed Olivier Thirot as CFO.

Financial highlights

• Q3 gross profit was $221.7 million, down 3% year-over-year; gross profit rate improved to 21.4% from 20.4%, aided by portfolio changes and MRP inclusion.

• Adjusted EBITDA for Q3 was $26.2 million (2.5% margin), up 20 bps year-over-year; adjusted EPS was $0.21, down from $0.50 in Q3 2023.

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

• Free cash flow year-to-date was $2.8 million, compared to $21 million in the prior year.

• Year-to-date revenue was $3.14 billion (down 12.8%); net earnings rose 24.6% to $31.2 million.

Outlook and guidance

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

• Q4 gross profit rate is projected at 20.4%, with organic GP rate at 19.3% and MRP contributing 110 basis points.

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

• Management expects continued EBITDA margin improvement from transformation and portfolio actions, with a focus on higher-margin specialties and operational efficiency.

• Effective tax rate for Q4 is expected to be in the low teens.