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  • Revenue: $1.06 billion for Q2 2024, down 13.1% from 2023.

  • Organic Revenue Growth: Improved 0.6% year-over-year.

  • Education Segment Revenue Growth: Up 22% year-over-year.

  • SET Segment Revenue: Up 10% reported, down 3% organic.

  • OCG Segment Revenue Growth: Improved 3% year-over-year.

  • Professional and Industrial Segment Revenue: Declined 9% year-over-year.

  • Gross Profit Rate: 20.2%, up from 19.8% in the prior year.

  • SG&A Expenses: Down 17% year-over-year on a reported basis.

  • Adjusted Earnings from Operations: $28.1 million, nearly doubled from the previous year.

  • Adjusted EBITDA Margin: Improved 180 basis points to 3.8%.

  • Reported EPS: $0.12 per share, compared to $0.20 in 2023.

  • Adjusted EPS: $0.71, nearly doubling from $0.36 in Q2 2023.

  • Free Cash Flow: $55 million, compared to $32 million in the prior year period.

  • Debt to Capital Ratio: 14.1% as of quarter end.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Kelly Services Inc (NASDAQ:KELYA) achieved an adjusted EBITDA margin of 3.4% in the first half of 2024, meeting their initial expectations.

  • The company’s education segment experienced strong growth, with revenue increasing by 22% year over year.

  • Kelly Services Inc (NASDAQ:KELYA) improved its position among the top 20 staffing firms in the US, according to staffing industry analysts.

  • The acquisition of Motion Recruitment Partners (MRP) is expected to enhance Kelly’s revenue growth potential and drive continued EBITDA margin expansion.

  • Kelly Services Inc (NASDAQ:KELYA) generated $55 million of free cash flow in the quarter, compared to $32 million in the prior year period.

Negative Points

  • Revenue for the second quarter of 2024 decreased by 13.1% compared to 2023, primarily due to the sale of the European staffing business.

  • The professional and industrial segment saw a 9% decline in revenue year over year.

  • Permanent placement fees declined by 20% year over year.

  • The gross profit rate on an organic basis declined by 100 basis points in Q2.

  • The company’s reported earnings per share for the second quarter was $0.12, down from $0.20 in 2023.

Q & A Highlights

Q: Can you provide an update on the Motion Recruitment Partners (MRP) business and its performance trends? A: Olivier Thirot, CFO, noted that MRP’s revenue for the first half of 2024 was about $260 million, with expectations for slight improvement in the second half. Compared to the previous year, the first half was down 8%, but the second half is expected to be flat to slightly down. Peter Quigley, CEO, expressed optimism about MRP’s long-term potential and the complementary nature of its business with Kelly Services.

Q: How are pricing trends and competition affecting your business segments? A: Peter Quigley, CEO, stated that while some suppliers might try to buy market share, there is no widespread industry pressure on pricing. Olivier Thirot, CFO, added that pricing spreads in their segments have remained stable, with slight variations due to customer mix rather than pricing pressure.

Q: What is the focus for future acquisitions, and how does MRP integration impact this strategy? A: Peter Quigley, CEO, emphasized that while integrating MRP is a priority, Kelly Services is still developing a pipeline for future acquisitions, particularly in high-margin, high-growth areas like science, engineering, technology, and telecom.

Q: What factors contributed to the organic growth in the second quarter, and how do you expect this to continue? A: Peter Quigley, CEO, attributed the organic growth to transformation-related initiatives and taking market share. He highlighted progress in their omnichannel strategy and focus on large enterprise customers. Olivier Thirot, CFO, mentioned expected sequential improvements and favorable comparables in the second half of 2024.

Q: Can you provide an update on the Kelly Arc platform and its market reception? A: Peter Quigley, CEO, reported high interest in the Kelly Arc platform, which connects AI and automation talent with customers. While adoption takes time, the platform has gained traction with over a dozen customers and hundreds of professionals, benefiting from a network effect as more users join.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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