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01/11 03:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several negative factors: slower economic growth, declining EBITDA margins, integration challenges, and customer cost reductions impacting revenues. The Q&A section reveals ongoing integration charges, unclear responses on M&A, and expected continued downsizing in federal business. Despite some positive elements like revenue growth and improved gross profit, the lack of a share repurchase program and reduced EPS contribute to a negative outlook. The overall sentiment is negative, as positive aspects are overshadowed by financial and operational challenges.
Revenue $1.16 billion, an increase of 11.5% versus Q1 last year. Organic revenue was up 0.2%, impacted by a 0.8% decline from reduced demand for federal contractors.
Education Segment Revenue Up 6.6% year-over-year, or 6.3% on an organic basis, due to ongoing fill rate improvement and higher bill rates, partially offset by fewer school days in January.
SET Segment Revenue Up 39% on a reported basis due to the acquisition of MRP. Organic revenue was down 7%, but down only 4% excluding a 3% decline related to lower demand for federal contractors.
ETM Segment Revenue Grew 1.9% on a reported basis and was flat year-over-year on an organic basis. Staffing services revenues declined 1.8% due to large customer cost reduction actions and lower demand for federal contractors.
Gross Profit $236.5 million, with a gross profit rate of 20.3%, an improvement of 60 basis points year-over-year. Improvement driven by the acquisition of MRP and lower employee-related costs.
SG&A Expenses $225.7 million, with adjusted organic SG&A expenses flat year-over-year. Increased in Education segment due to revenue increase, while declined in ETM and SET.
Earnings Per Share Reported EPS of $0.16 compared to $0.70 in Q1 2024. Adjusted EPS was $0.39 compared to $0.56 in the prior year, primarily due to debt incurred for the MRP acquisition.
Adjusted EBITDA $34.9 million, an increase of 5% versus the prior year, with adjusted EBITDA margin declining 20 basis points to 3%. ETM and Education improved their organic adjusted EBITDA margin.
Total Available Liquidity $181 million, comprising $28 million in cash and $153 million of available liquidity on credit facilities.
Net Debt Total borrowing of $205 million at the end of the quarter, with a $35 million net paydown on debt.
Integrated Permanent Hiring Solutions: Launched an integrated permanent hiring solutions business line by combining global Recruitment Process Outsourcing Specialty and MRP's talent acquisition solutions brand, Sevenstep.
Outcome-Based Solutions: Demand for higher-margin outcome-based solutions remained robust, particularly within the semiconductor and renewable sectors.
Market Positioning in Technology Staffing: Acquisition of MRP has propelled Kelly to among the top 10 providers in technology staffing.
Market Positioning in Global RPO: Acquisition of MRP has positioned Kelly among the top 5 providers in global Recruitment Process Outsourcing.
Operational Efficiency Initiatives: Implemented targeted actions to deliver structural improvements to the cost base, contributing to incremental EBITDA margin expansion.
Unification of Business Units: Completed the unification of OCG and P&I business units, enhancing the ability to deliver a full suite of offerings to large customers.
Integration of Motion Recruitment Partners: Accelerated integration of MRP, concluding the earn-out period, enabling pursuit of synergies.
Technology Modernization Strategy: Initiated a strategy to modernize front and back-office systems leveraging MRP's technology stack.
Market Demand Pressure: The dynamic macroeconomic environment is causing clients to take a measured approach to workforce management, which may temper staffing market demand in the near term.
Federal Contractor Demand: There is a negative impact on revenue due to reduced demand for federal contractors, which is expected to affect revenue growth by 1% to 1.5%.
Economic Growth Slower than Expected: An additional 1% negative impact on revenue is anticipated due to slower economic growth relative to initial expectations.
Adjusted EBITDA Margin Decline: A decline of 20 to 30 basis points in adjusted EBITDA margin is expected in the second quarter, consistent with the first quarter decline.
Integration Challenges: The integration of Motion Recruitment Partners (MRP) may present challenges as the company seeks to realize synergies and streamline operations.
Cost Reduction Actions by Customers: Large customer cost reduction actions are leading to a decline in staffing services revenues, particularly in the ETM segment.
Operational Efficiency: While the company is focused on improving operational efficiency, the timing of benefits from these initiatives may be impacted by current market conditions.
Organic Revenue Growth: Kelly delivered organic revenue growth that was in line with expectations, with each business making strategic contributions despite changes in demand.
Operational Efficiency Initiatives: Implemented targeted actions to deliver structural improvements to the cost base, contributing to incremental EBITDA margin expansion.
Integration of Motion Recruitment Partners (MRP): Accelerated integration of MRP to ramp up pursuit of synergies and modernize front and back-office systems.
Launch of Integrated Permanent Hiring Solutions: Launched a new business line combining global RPO and MRP's talent acquisition solutions, enhancing market position.
Streamlined Operating Model: Completed unification of OCG and P&I business units to enhance service delivery and customer engagement.
Q2 Revenue Growth Expectation: Expect total revenue growth of 6% to 7% in Q2 2025, with a negative impact from reduced demand for federal contractors.
Organic Revenue Outlook: Expect organic revenue to be down 1% to 2% in Q2, roughly flat excluding federal contractor impacts.
Adjusted EBITDA Margin Projection: Expect a decline of 20 to 30 basis points in adjusted EBITDA margin for Q2, with anticipated expansion in Q3 and Q4.
Full Year Margin Expansion: Anticipate adjusted EBITDA margin expansion for the full year, despite current macroeconomic challenges.
Long-term Growth Strategy: Focus on capturing market share and driving incremental organic revenue growth in high-growth specialties.
Share Repurchase Program: None
The earnings call highlights several negative factors: slower economic growth, declining EBITDA margins, integration challenges, and customer cost reductions impacting revenues. The Q&A section reveals ongoing integration charges, unclear responses on M&A, and expected continued downsizing in federal business. Despite some positive elements like revenue growth and improved gross profit, the lack of a share repurchase program and reduced EPS contribute to a negative outlook. The overall sentiment is negative, as positive aspects are overshadowed by financial and operational challenges.
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