Kelly Partners’ Earnings Call Highlights Growth Amid Sell-Off

Kelly Partners Group Holdings Ltd. ((AU:KPG)) has held its Q2 earnings call. Read on for the main highlights of the call.

Kelly Partners Group Holdings Ltd. delivered another period of strong financial progress, blending double-digit growth with disciplined capital management and ambitious expansion. Management struck a confident tone on strategy, M&A and technology investment, while openly acknowledging investor concerns around a steep share-price sell-off, higher leverage and softer organic growth.

Revenue Growth and Run Rate Expansion

Group revenue rose 17% to $76.0M for the half, up from $64.9M, underscoring resilient demand across its accounting network. The reported revenue run rate now stands at $164.2M, implying roughly 22% growth versus FY25 revenue of $134.6M and signalling a materially larger business as recent acquisitions annualise.

Profitability Improvements

Underlying operating EBITDA increased 15.2% to $21.0M, supported by robust margins despite ongoing investment in growth and systems. Australia delivered an operating EBITDA margin of 31.3% and the group 27.6%, while underlying NPATA to the parent climbed 12.8% to $5.6M, reinforcing the profitability of the model.

Strong Returns and Capital Efficiency

The company highlighted striking return metrics, with group ROE at 38.1% and parent ROE at 32.6%, reflecting efficient deployment of capital into high-return practices. Management also pointed to long-term book value compounding at about 34.9% annually over nearly two decades and cash conversion of 101.1% in the half, keeping cash generation tightly aligned with earnings.

Successful Programmatic M&A and Expansion

Kelly Partners completed six acquisitions during the period, contributing partial-year revenue estimated at $18M–$22M and deepening its footprint in key regions. The group expanded into Ireland, India, Hong Kong and the Philippines while strengthening its U.S. presence, positioning itself as an increasingly global platform for private-business accounting.

Maintained Per-Share Focus

Management stressed that growth is being pursued on a per-share basis rather than just by headline scale, with free cash flow per share up about 10% in the half. Since 2021, both earnings per share and free cash flow per share have nearly doubled, broadly tracking revenue expansion and underscoring a focus on intrinsic value creation for continuing shareholders.

Operational Discipline and Working Capital Improvement

Operational efficiency continued to improve, with lockup days, a key working-capital metric, reduced to 49.8 days, reflecting better management of receivables and work in progress. Cash from operations rose 6.4%, and management framed these improvements as important support for funding acquisitions and technology investment without overstretching the balance sheet.

Investment in Software, AI and People

The group is pushing ahead with in-house software development begun in 2021, including a single source of truth data platform, client and team apps and the Kudos order system. It is also actively planning AI adoption to augment advisors, with a relatively young partner cohort, averaging about 42 years of age, seen as an advantage in embracing new technology.

Market Positioning and Strategy

Strategically, Kelly Partners aims to be Australia’s leading global accounting firm for private businesses, leveraging scale, systems and brand across multiple regions. With audit work limited to roughly 5% or less of revenue, the firm believes it is less exposed to structural disruption in audit markets, and it reported a very strong M&A pipeline as more firms seek to join the platform.

Significant Share Price Decline

Despite solid fundamentals, the share price has fallen about 49.5% over the past year, a disconnect management linked to broader sentiment shifts affecting software and roll-up peers such as Xero and Constellation. This slump has sparked internal discussion of on-market buybacks and employee equity schemes, as management seeks to signal confidence and align staff with future upside.

Increased Leverage from Acquisitions

Net debt rose by $18.6M to $77.1M since 30 June 2025, lifting net debt to underlying EBITDA from 1.42x to 1.79x, primarily due to financing acquisitions across EMEA and India and partner buy-in loans. While still within what management considers a comfortable range, the step-up in gearing underscores the need for continued earnings growth and careful balance-sheet stewardship.

Temporary Working Capital and Overdraft Pressure

Working-capital debt jumped from $7.7M to $15.2M as temporary overdrafts were used to close two acquisitions quickly, creating short-term pressure on facilities. Management said these overdrafts have since been refinanced into longer-term debt, framing the spike as a timing issue rather than a structural change in funding strategy.

Lower Organic Growth Rate

Organic growth for the period came in at 4.2%, below the group’s usual 5%–6% target and well behind the 12.8% contribution from acquired revenues. While still positive, this softer organic performance raises questions about the underlying growth engine, which management must balance against its aggressive acquisition program.

Cash Flow and Conversion Slightly Softening

Cash from operations increased 6.4%, lagging revenue growth and highlighting some pressure on cash efficiency as the group scales. Cash conversion slipped modestly to 101.1% from 103% in the prior half, still within the stated 85%–100% guidance band but moving towards the midpoint rather than the top end.

Integration and Margin Timing Effects from Rapid M&A

The company acknowledged that six deals in a short window brought complexity, with most targets contributing only a few months of revenue and requiring integration effort before full benefits emerge. Management cautioned that such rapid growth can temporarily weigh on margins as new firms are uplifted to group standards, reinforcing a lag between acquisition spend and peak profitability.

Outlook and Forward Guidance

Looking ahead, Kelly Partners will keep capital allocation focused on accretive M&A and continued investment in software and AI, with share buybacks treated as secondary. Management is guiding to organic growth of about 5%, maintaining operating EBITDA margins near current levels, preserving strong ROE, keeping net debt at conservative multiples and pursuing a secondary listing once debt structures are optimised.

The earnings call painted a picture of a fast-growing, highly profitable accounting group using technology and programmatic M&A to build scale, even as markets mark down the stock. For investors, the key debate is whether strong cash generation, high ROE and disciplined expansion can outpace rising leverage and modest organic growth to eventually close the gap between fundamentals and share price.