Kelly Q3 revenue flat on organic basis
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Third-quarter revenue at Kelly Services (NASDAQ: KELYA, KELYB) fell 7.1% year over year to approximately $1.04 billion. On an organic basis — which excludes the impact of the sale of Kelly’s European staffing business and the recent acquisition of Motion Recruitment Partners — revenue growth was essentially flat year at 0.2% year over year.
“In the third quarter, we remained focused on what we can control as uncertain macroeconomic market conditions persisted and once again delivered stable year-over-year organic revenue that outpaced the market,” President and CEO Peter Quigley said in a press release. “Contributing to this trend is continued double-digit revenue growth in education, our ongoing expansion into the market for higher-margin outcome-based solutions in SETT and P&I [science, engineering and technology and telecom and professional and industrial], and sequential stability in MSP and RPO revenue in OCG.”
The Troy, Michigan-based firm’s adjusted EBITDA margin increased by 20 basis points year over year, which it attributed to reduced operating expenses, the sale of Kelly’s European staffing operations and the acquisition of MRP. The company expects these actions to contribute to continued year-over-year EBITDA margin expansion in the fourth quarter as well.
“We expect to build on our momentum as we close the year, propelled by our growth and efficiency initiatives, which are positioning Kelly to capitalize when staffing demand rebounds and continue delivering above-market performance,” Quigley said.
Kelly reported US revenue rose 16.1% year over year in the third quarter, though Canadian revenue fell 3.1% (down 1.5% in constant currency). Education staffing remained a bright spot, with revenue up 10.1%.
In other data:
- Perm placement revenue at Kelly fell 7.0% year over year on a constant currency basis to $13.5 million.
- Gross margin improved, though net earnings fell 88.4%
- The first quarter includes $56.3 million in restructuring charges, compared to $59.4 million in the year-ago quarter.
In a conference call with investors, Kelly noted that the closing of the European staffing transaction in January unlocked more than $100 million of capital to reinvest in organic and inorganic growth in North American staffing and global MSP and RPO businesses. It is developing a pipeline of acquisition targets in science, engineering and technology; education; and OCG.
Kelly Services – Q3 2024
(US$ millions) | Q3 2024 | Q3 2023 | % change | % constant currency |
Revenue | 1,038.10 | 1,118.00 | -7.10% | -7.00% |
Gross profit | 221.7 | 228.5 | -3.00% | -2.90% |
Gross margin | 21.40% | 20.40% | - | - |
Net earnings/loss | 0.8 | 6.6 | -88.40% | - |
Revenue by Segment
Professional & industrial | 370.4 | 378 | -2.00% | -1.50% |
Science, engineering & technology | 405.2 | 295.7 | 37.10% | 37.10% |
Education | 142.1 | 128.1 | 10.90% | 10.90% |
Outsourcing & consulting | 121 | 114.1 | 6.00% | 5.70% |
International | - | 203 | -100.00% | -100.00% |
Revenue by Geography
Americas | ||||
United States | 923.6 | 795.5 | 16.10% | 16.10% |
Canada | 49.3 | 50.9 | -3.10% | -1.50% |
Puerto Rico | 26.6 | 26.5 | 0.20% | 0.20% |
Mexico | 12.7 | 18.4 | -30.90% | -23.30% |
Europe | ||||
Switzerland | 0.8 | 57 | -98.60% | -98.60% |
France | 0.1 | 47 | -99.70% | -99.70% |
Portugal | - | 48.6 | -100.00% | -100.00% |
Italy | - | 16.1 | -100.00% | -100.00% |
Other | 9.2 | 47.1 | -80.60% | -81.40% |
Asia Pacific | 15.8 | 10.9 | 44.90% | 41.20% |
Guidance
Kelly forecast revenue to increase by 1.5% to 2.5% on an organic basis in the fourth quarter.
Share Price
Kelly Services set a new 52-week low during Thursday’s trading session when it reached $18.07. Over this period, the share price is down 8.06%. The company has a market cap of $646.73 million.