Kelly Services, Inc. Q3 FY2025 earnings call

• Company Overview: Chris Layden discusses Kelly's history, diverse portfolio, and challenges from macroeconomic factors like sluggish labor market and AI boom. - Results Discussion: Troy Anderson covers revenue decline, segment performances, gross profit of $194 million (down 12.5% y-o-y), SG&A expenses improvement, goodwill impairment of $102 million, and EPS details. - Strategic Initiatives: Focus on stabilizing performance via workforce reduction, technology modernization in SET and enterprise, growth through organic and inorganic means, efficiency via cost restructuring, and culture enhancement.

Education: Grew 0.9% year-over-year, driven by fill rate improvement, but lower growth due to maturing customer portfolio and macro delays. SET: Revenue down 9% in the quarter (-3.5% excluding federal government impact). Telecom and Engineering are growth areas within SET, while Life Sciences and Technology saw year-over-year declines. ETM: Revenue declined 13.1% year-over-year (-1.9% underlying). Staffing services revenues declined, outcome-based revenues decreased, but MSP showed modest growth.

• Fourth quarter revenue expected to decline 12% to 14%, including 8% negative impact from discrete large customers and federal contractors; underlying decline 4% to 6%. - Adjusted EBITDA margin expected ~3% in Q4, with sequential increase but pressure likely through first half of 2026.

• Macro environment impacts including sluggish labor market. - Government shutdown delays and indirect economic ripples from prolonged shutdown. - Uncertainty from AI boom and its impact on demand and talent needs.

Q: Joe Gomes asks about breaking down federal government and large customer impacts on revenue and what's needed for revenue trends to reverse.

A: Troy Anderson says they're roughly equal and it's about moving forward with initiatives through macro softness.

Q: Kevin Steinke asks about AI impact, education delays, and SET integration.

A: Chris Layden and Troy Anderson discuss AI opportunities, education decision delays due to macro, and SET tech stack integration progress.

Q: Marc Riddick asks about cash usage, CapEx, and acquisitions.

A: Troy Anderson talks about CapEx, repurchase activity, and active corporate development team looking for opportunities in SET and Education.

Q: Jessica Luce asks about sales cycle and pricing pressures.

A: Chris Layden and Troy Anderson discuss robust sales cycle across segments and stable pricing with some mixed dynamics in ETM.