Kelly Services’ Earnings Call: Mixed Results Amid Challenges

Kelly Services ((KELYA)) has held its Q3 earnings call. Read on for the main highlights of the call.

Kelly Services’ recent earnings call painted a mixed picture, with strong operational achievements in certain segments like Education and Telecom, and improved cash flow. However, these positives were overshadowed by significant revenue declines, a large goodwill impairment charge, and impacts from reduced demand from key customers and the federal government. The company is focusing on strategic restructuring and technology modernization to address these challenges.

Education Segment Achieves Record Fill Rate

The Education segment of Kelly Services achieved a remarkable 90% fill rate overall in the quarter for the first time. This milestone indicates strong operational performance and resilience in the Education sector, despite the broader challenges faced by the company.

Telecom Specialty Growth

Within the SET segment, the telecom specialty continued its robust performance, achieving double-digit growth. This growth is a continuation of the strong performance observed in the previous quarter, highlighting the segment’s potential as a key growth driver for Kelly Services.

Cash Flow Improvement

Kelly Services reported a significant improvement in operating cash flow, generating $94 million through the third quarter. This marks a substantial increase compared to the prior year, showcasing effective cash management strategies amidst challenging conditions.

Revenue Decline

The company reported a revenue decline of 9.9% year-over-year for the third quarter of 2025, totaling $935 million. This decline was primarily driven by lower-than-expected growth in key segments, reflecting the challenging market environment.

Goodwill Impairment

A non-cash goodwill impairment charge of $102 million was recorded in the quarter. This charge was attributed to declines in business performance and adverse macroeconomic conditions, impacting the company’s financial health.

Federal Government and Large Customer Impacts

Discrete impacts from reduced demand from the federal government and three large customers contributed to approximately 8% of the year-over-year revenue decline. This highlights the challenges Kelly Services faces in maintaining its customer base.

Valuation Allowance on Deferred Tax Assets

The company recorded a valuation allowance of $70 million due to a cumulative loss position and near-term financial performance projections. This reflects the financial adjustments necessary to align with current performance expectations.

Adjusted EBITDA Decline

Adjusted EBITDA saw a significant decline of 36.7% compared to the prior year, with the adjusted EBITDA margin falling to 1.8%. This decline underscores the financial pressures the company is currently facing.

Forward-Looking Guidance

Looking ahead, Kelly Services provided guidance indicating a challenging operating environment due to macroeconomic factors, including a sluggish labor market and AI developments. The company is targeting a 12% to 14% decline in revenue for the fourth quarter, with an adjusted EBITDA margin of approximately 3%. Despite these challenges, Kelly Services is focusing on stabilizing performance and driving growth through enhanced market approaches, targeted investments, and leveraging AI opportunities to improve efficiency and productivity.

In summary, Kelly Services’ earnings call highlighted a mix of operational successes and financial challenges. While certain segments like Education and Telecom showed strong performance, the overall sentiment was tempered by revenue declines and financial adjustments. The company’s strategic focus on restructuring and technology modernization aims to navigate these challenges and drive future growth.