Kelly Services, Inc. Q4 FY2025 earnings call

• Announced agreement with Hunt Companies for Class B stock purchase, reconstituted board with new directors. - Fourth quarter revenue at top end of expectations, segments performed with Education growth, SET telecom growth offsetting IT pressure, ETM stable. - Technology modernization initiative: SET acquisitions cut over to modernized platform. - AI integration: Launched Grace Boost, AI recruiting solution deployed for a customer with positive results. - Appointed Pat McCall as Chief Growth Officer, initiated search for next President of SET.

For the fiscal year, revenue totaled $4,250,000,000, down 1.9% overall. At the segment level, Education grew 1.3%, reflecting continued fill rate improvement. SET’s underlying revenue declined 5.4% in the quarter, modestly better than expectations, with demand pressure in IT offset by telecom growth. Underlying ETM also declined 5.4%, relatively consistent across quarters. Reported gross profit was $197,000,000, down 18.4% vs prior year, with gross profit rate 18.8%, down 150bps. Education’s GP rate held flat at 14.2%, SET’s at 24.2% declined 130bps, and ETM’s at 18.1% declined 220bps.

For 2026, Q1 revenue expected to decline 11-13% y/y or underlying decline 3-5% ex-discrete, adjusted EBITDA margin ~1.5% stepping down from Q4. Expect relative improvement each quarter, modest revenue growth in H2, adjusted EBITDA margin expansion in H2 as discrete impacts anniversary and growth initiatives take effect.

• Discrete impacts from federal government and large customers. - Macroeconomic uncertainties affecting hiring. - Incremental gross margin pressure from employee-related costs (healthcare, workers' comp) and business mix changes. - Technology integration challenges with modernization initiative.

Q: Joseph Gomes asked about Hunt's expertise and impact on Class A shareholders.

A: Chris Layden said Hunt supports growth, no changes to business, governance protections align interests.

Q: Kartik Mehta asked about AI impact on Kelly.

A: Chris Layden said AI is net positive, enabling productivity and differentiation.

Q: Kevin Steinke asked about margin trend and 2026 outlook.

A: Troy Anderson and Chris Layden discussed margin drivers, growth initiatives like Chief Growth Officer and organic growth drivers, and AI's role in efficiency.