Kelly Services, Inc. Q1 FY2026 earnings call

• Initial implementation of new MSP program complete with expansion opportunities, One Kelly go-to-market approach effective. - Newly formed growth office since Feb collaborating to build integrated commercial operating framework, migration of commercial teams to new CRM system expected mid-year as part of tech modernization. - Technology modernization multi-phase approach on track, first quarter successful in acquisitions cutover from legacy to modernized platform. - In March, Joel Legge joined as president of SET, proven industry leader with complex transformation experience; reevaluating ETM business leadership structure, short-term personally involved in management. - Impact 2026 Leadership Summit in March focused on building customer-centric etc. enterprise, preparing for H2 growth. - First quarter executed strategic priorities, revenue $10B, adjusted EBITDA $15.8M with margin 1.5%, SG&A expenses decreased.

For the first quarter of 2026, revenue totaled $1 billion, down 10.7% overall vs Q1 last year. Excluding specific impacts, revenue was down 3.3%. Underlying ETM declined 0.4% y-o-y, with each talent solution specialty growing; staffing had net underlying decline of just 1.2% in the quarter with growth in Feb and Mar. Education decreased 4.8% y-o-y due to delayed new contracts, weather-related school closures, etc., expected to improve sequentially and return to growth in H2 2026. SET's underlying revenue declined 6% in the quarter, led by near-term demand pressure in technology specialty, confident of sequential q-o-q improvement in 2026.

• Expectations unchanged from Feb, Q2 expected y-o-y improvement, overall revenue decline 7%-9% with at least 100 basis points improvement in underlying decline. - Adjusted EBITDA margin expected at least 2.5% in Q2, significant reduction in y-o-y decline, expect relative improvement each successive quarter for revenue and adjusted EBITDA margin, modest revenue growth in H2 2026, measurable year-over-year margin expansion in H2 and modest increase full year.

• Q: About cost improvements and core SG&A reductions timing, A: Chris and Troy responded on expense reductions, disciplined execution, and progress in EBITDA margin.

Q: Timing of technology activity and ERP, A: Expected Q4 phase migration to enterprise platform, CRM HubSpot deployment in Q2 migrating commercial sellers by mid-year.

Q: Demand drivers, A: Technology demand had near-term pressures but some encouraging signals like positive consultant count improvement in Mar and Apr, sequential improvement in some businesses. - Q: Kelly different from prior downturns, A: Chris responded on scale, capability, RPO offering, and Growth Office establishment for differentiation.

Q: Cost reduction and earnings power, A: Troy responded on cost reduction, margin recovery as pivot to growth. - Q: Core SG&A, incentive comp, gross margin improvement, A: Kevin asked about core SG&A flattening, incentive comp swing, and gross margin improvement drivers, responded on core SG&A, incentive variability, and gross margin improvement from timing, mix, etc. - Q: Hunt companies and growth officer, A: Chris responded on new board members supporting strategy, and Growth Officer Pat McCall's role in setting foundation for commercial operating framework.